Japan’s Seven & i Holdings, owner of the global convenience store chain 7-Eleven, has rejected a takeover bid from Canada’s Alimentacion Couche-Tard, saying the rival’s all-cash offer of about $39 billion “significantly undervalued the company.”
Seven & i said on Friday that it was “ready to seriously consider any proposal,” but that the proposal from the Circle K convenience chain operator “is not in the best interest of shareholders and stakeholders.” Seven & i said it accepted Couche-Tard’s proposal on Aug. 15. Couche-Tard will acquire all of the company’s outstanding shares listed on the Tokyo Stock Exchange for $14.86 per share in cash, valuing the company at about $38.7 billion. The proposal represents a premium of about 21% as of Aug. 15, but slightly below the stock price as of Friday.
In a letter sent to Couche-Tard on Friday, Seven & i said the proposal was “ill-timed and materially undervalued our standalone trajectory and the additional feasible steps we see to realise and enhance shareholder value in the short to medium term”.
Seven & i added that even if Couche-Tard raises its asking price, its proposal “does not fully take into account the many significant challenges that such a transaction would face from U.S. competition enforcement agencies in the current regulatory environment and does not provide certainty of completion.”7-Eleven and Circle K are among the world’s largest convenience store chains by number of stores.
A merger 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 around the world. Bloomberg Intelligence analyst Diana Rosselló Pena has previously said the deal could draw scrutiny from U.S. antitrust regulators and force asset sales.
Couche-Tard’s incoming CEO, Alex Miller, said on the company’s earnings call on Thursday that he was confident about financing the deal and wanted to negotiate constructively with Seven & I. Couche-Tard did not immediately respond to a request for comment.
If the deal goes through, it would be the largest-ever foreign acquisition of a Japanese company and a major test of Japan’s new guidelines aimed at encouraging mergers and acquisitions to boost Japan’s competitiveness. Seven & i also faces pressure from activist investors for greater shareholder returns.
Seven & i reportedly plans to seek government protection to counter Couche-Tard’s takeover. The Japanese retail giant is reportedly asking the government to change its designation from a “non-core company” to a “core company” for national security reasons under the Foreign Exchange and Foreign Trade Act, which would require any company looking to acquire more than 10% of Seven & i’s shares to be vetted by the government.
Seven & i was founded by the late Masatoshi Ito, who grew the company from a small family-run store into a global retail empire. Ito’s children, brothers Junro and Yasuhisa, and sister Hisako Yamamoto, collectively own more than 10% of Seven & i, with a combined net worth estimated by Forbes at $4 billion. Ito, honorary chairman of Seven & i, will die in 2023 at age 98.
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