Seven & i Holdings, the Japanese owner of the global 7-Eleven convenience store chain, has rejected a takeover offer from Canada’s Alimentation Couche-Tard, stating that the near $39 billion cash bid “grossly undervalues” the company. Seven & i disclosed that it acknowledged the proposal from Circle K convenience chain operator on August 15, offering to acquire all outstanding shares at $14.86 apiece in cash, valuing the company at about $38.7 billion. Despite the premium of roughly 21% as of August 15, Seven & i believes the offer is not in the best interest of its shareholders and stakeholders, as it does not adequately acknowledge the company’s standalone path and potential for shareholder value.
In a letter to Couche-Tard, Seven & i mentioned that the proposal is opportunistically timed and does not reflect the multiple challenges a transaction of this magnitude would face from U.S. competition law enforcement agencies in the current regulatory environment. Despite the potential for improvement in the offering price, Seven & i remains concerned about the lack of certainty in closing the deal. Both 7-Eleven and Circle K are among the largest convenience store chains globally, and a merger between the two could trigger scrutiny from U.S. antitrust regulators, potentially leading to asset sales.
If the deal between Seven & i and Couche-Tard were to proceed, it would create one of the world’s largest retail groups with over 100,000 convenience stores, retail outlets, and gas stations globally. This could potentially pose challenges in terms of antitrust regulations and regulatory approval. The proposed acquisition marks a significant test of Japan’s new guidelines to promote mergers and acquisitions and enhance the country’s competitiveness. Seven & i has been under pressure from activist investors seeking structural reforms for higher shareholder returns, adding complexity to the potential deal.
Reports suggest Seven & i has planned to seek government protection to defend itself against Couche-Tard’s bid. The company has reportedly sought to change its designation from “non-core” to “core” for national security under the Foreign Exchange and Foreign Trade Act, which would require government vetting of any entity seeking to acquire more than 10% of such a company. Seven & i was founded by the late Masatoshi Ito and is currently owned by his children, who collectively have a significant stake in the company and a combined net worth estimated at $4 billion by Forbes.
This potential acquisition would be the largest-ever foreign takeover of a Japanese company if it goes through, highlighting the growing trend of cross-border acquisitions in the global retail industry. Couche-Tard’s CEO-elect has expressed confidence in financing the deal and intends to engage with Seven & i in a constructive manner. The outcome of this proposed acquisition will not only have implications for the two companies involved but also for the broader retail industry and potential regulatory changes. Moving forward, both companies will need to navigate complex regulatory processes and stakeholder interests to determine the fate of the deal.
