7-Eleven’s Japanese owner said to consider going private in $77.8b deal to avoid foreign buyout

TOKYO - The Japanese owner of 7-Eleven is mulling over going private by buying back its own shares in a bid to avoid a takeover attempt by Canadian rival Alimentation Couche-Tard, people with knowledge of the matter said.

Seven & i Holdings is considering a management buyout with funding from banks, Itochu and the founding Ito family in a transaction that could be worth 9 trillion yen (S$77.8 billion), the people said.

The deal could be presented as an option for shareholders in the event that Couche-Tard becomes more aggressive with its pursuit of Seven & i and makes a tender offer, the people said.

The operator of 7-Eleven stores has not said anything publicly since Couche-Tard increased its proposed price for Seven & i to US$18.19 a share in October to value the Japanese retailer at 7.2 trillion yen.

Seven & i had rebuffed an earlier, lower offer by the Canadian operator of Circle K stores and embarked on a restructuring aimed at unlocking value.

Under the management buyout being discussed, which would also be the largest-ever in Japan, trading house Itochu, the founding family and existing investors would contribute 3 trillion yen in cash and equity, the people said. Japan’s top mega banks – Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Mizuho Financial Group – would put up 6 trillion yen in financing, they said.

Talks are ongoing, and the deal could be difficult given its size, the people said. There is a chance that the management buyout may not proceed if Couche-Tard rescinds its proposal to buy Seven & i, they said.

Seven & i shares were suspended on Nov 13 following the news of the potential deal.

A management buyout would be a remarkable unified response to Couche-Tard’s takeover approach, which itself is the biggest foreign attempt to buy a Japanese target. With the participation of Seven & i’s biggest competitor in the domestic convenience store business – Itochu – it would reflect the coordinated resistance of corporate Japan to foreign control of one of its most famous companies.

On the other hand, a foreign takeover would be a watershed moment for corporate Japan, in a country that has long been resistant to large cross-border deals. 

Although Seven & i laid out plans that will effectively split the company, the management buyout would initially seek to acquire the entire business, one of the people said. Following a deal, the new owners would eventually implement the plan to separate the business focused on 7-Eleven, convenience stores and petrol stations from the other, which is made up of less profitable retail operations, the person said. 

Itochu, one of Japan’s top trading companies, runs FamilyMart, a rival to 7-Eleven stores. Any deal may seek to deliver synergies between the two convenience-store chains. 

The heirs of Mr Masatoshi Ito, who expanded a small family-owned shop into one of Japan’s largest retailers and turned 7-Eleven into a global enterprise, together own about 8.5 per cent of Seven & i, according to data compiled by Bloomberg. His son Junro Ito is a vice-president and board member, and holds part of that stake. 

The retailer traces its origins back to the Yokado Clothing Store, founded in Tokyo in 1920. BLOOMBERG