09:51 AM EDT, 08/20/2024 (MT Newswires) -- S&P Global Ratings said on Tuesday that it might lower Alimentation Couche-Tard's ( ANCTF ) credit ratings if the Montreal-based convenience store operator completes the proposed acquisition of Seven & i Holdings.

The ratings agency added it has conservatively analyzed a scenario whereby the acquisition is fully funded with debt. In assuming an enterprise value of over US$55 billion for Seven & i Holdings and assuming no divestitures, S&P estimates that Couche-Tard's S&P Global Ratings-adjusted debt to EBITDA would increase to over 5 times -- significantly above S&P's 3.0 times downside trigger.

If the company completes the transaction, the ratings agency said it will review its ratings based on the combined entity's business strengths, pro forma capital structure, expected time frame to deleverage, and financial policies regarding balance sheet strength and future acquisitions.

S&P said it sees Couche-Tard's (BBB+/Stable/A-2) nonbinding, friendly proposal to acquire Japan-based Seven & I Holdings as consistent with the company's ambitions to achieve US$10 billion of EBITDA by fiscal year 2028, consolidate its market share in the fragmented U.S. fuel retail market, and establish a strong presence in the Asian convenience-store market.

The Globe and Mail newspaper noted that Raymond James estimates Seven & i is worth roughly US$49-billion, after accounting for the nearly 23% spike in the company's Tokyo exchange-traded stock on Monday after the proposal was first reported by Japanese newspaper Nikkei.

ATD was at last look up $0.22 at $81.99 on the TSX.

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