Alimentation Couche-Tard Inc. could issue debt and tap its pension shareholders for funding in order to finance a proposed deal to buy out 7-Eleven owner Seven & i Holdings Co., people familiar with the Canadian retailer’s thinking said.

A leveraged acquisition of the Japanese company would be feasible because of its strong cash flow, which will help to pay down debt quickly, said the people, who asked not to be identified because the information isn’t public. Couche-Tard is interested in the entirety of Seven & i, they added.

The companies disclosed last week that Couche-Tard had made a preliminary non-binding proposal to buy Seven & i, which operates more than 85,000 stores across the globe. Any deal to acquire the retailer, which has a market value of about ¥5.3 trillion ($36.8 billion), would be the biggest-ever foreign takeover of a Japanese company. Couche-Tard, which operates 16,700 stores, is worth about $55.5 billion.

Representatives for Couche-Tard didn’t immediately respond to emailed requests for comment. A representative for Seven & i didn’t immediately respond to a request for comment.

Foreign takeovers of Japanese companies are extremely rare. Couche-Tard’s approach is being seen as a test of recent changes in guidelines for merger and acquisition proposals, and whether corporate Japan is ready for a large-scale takeover of a well-known company.

Couche-Tard would seek to maintain local leadership and intends to invest in the business, the people said.

As for any regulatory issues that might arise from competition authorities, the two businesses are complementary and operate in highly fragmented markets, the people said.

Couche-Tard has experience making divestments in the past to satisfy regulators: In 2017, it agreed to divest gasoline stations as part of its deal to buy CST Brands Inc., and in 2022 agreed to sell assets as part of a proposed deal to buy Wilsons gas stations in Canada.

Seven & i appointed a special committee of independent outside directors to evaluate the proposal, the terms of which have not been made public. The company hasn’t given any indication of when or how it intends to respond.

Seven & i has come under pressure from investors to boost its value. Activist fund ValueAct Capital Management LP asserted last year that its assets could be worth more and to narrow its focus to 7-Eleven stores. This week, Artisan Partners, an investor in Seven & i, joined the fray, urging the Japanese company to negotiate with Couche-Tard.