Seven & i Holdings, the Japanese owner of the global 7-Eleven convenience store chain, has rejected the takeover offer from Canada’s Alimentation Couche-Tard, saying the rival’s near $39 billion cash bid “grossly undervalues” the company.
Seven & i said on Friday that while it is “open to sincerely [considering] any proposal,” the offer from the Circle K convenience chain operator “is not in the best interest” of its shareholders and stakeholders. Seven & i disclosed it acknowledged on August 15 Couche-Tard’s proposal, which offers to acquire all of its outstanding shares at $14.86 apiece in cash, valuing the Tokyo-listed company at about $38.7 billion. The offer represents a premium of roughly 21% as of August 15, but slightly below its stock price as of Friday.
In the Friday letter to Couche-Tard, Seven & i said the proposal “is opportunistically timed and grossly undervalues our standalone path and the additional actionable avenues we see to realize and unlock shareholder value in the near- to medium-term.”
Seven & i added that even if Couche-Tard improves the offering price, the proposal “does not adequately acknowledge the multiple and significant challenges such a transaction would face from U.S. competition law enforcement agencies in the current regulatory environment and provides no certainty to closing.” Both 7-Eleven and Circle K are among the world’s largest convenience store chains by number of stores.
A tie-up between Seven & i and Couche-Tard would create one of the world’s largest retail groups with more than 100,000 convenience stores, retail outlets and gas stations in the U.S. and the rest of the globe. That could trigger scrutiny from the U.S. antitrust regulators, forcing the sale of assets, Bloomberg Intelligence analyst Diana Rosero-Pena has previously said in a note.
Couche-Tard’s CEO-elect Alex Miller said in the company’s earnings call on Thursday that it is confident in financing the deal and that it wants to engage with Seven & i constructively. Couche-Tard didn’t immediately respond to a comment request.
The deal, which would be the biggest-ever foreign takeover of a Japanese company if it goes through, marks a major test of Japan’s new guidelines to promote mergers and acquisitions in an effort to boost the country’s competitiveness. It also came as Seven & i has been facing pressure from activist investors calling for structural reforms for higher shareholder returns.
Seven & i has reportedly planned to seek government protection to defend itself against Couche-Tard’s bid. Media reports said the Japanese retail giant had sought to have the government change its designation from “non-core” to “core” to national security under the Foreign Exchange and Foreign Trade Act, which would require officials’ vetting of any entity seeking to acquire more than 10% of such a company.
Seven & i was founded by the late Masatoshi Ito, who grew it from a small family-owned shop into a global retail empire. Ito’s children, brothers Junro and Yasuhisa and sister Hisako Yamamoto, collectively own more than 10% of Seven & i and have a combined net worth of $4 billion, Forbes estimated. The honorary chairman of Seven & i, Ito passed away in 2023 at age 98.
Read the full article here
