Japanese 7-Eleven owner rejects Canadian rival’s $50 billion takeover bid

Tokyo – Japanese retail giant Seven & i Holdings said on Sept 6 it had turned down Canada’s Alimentation Couche-Tard’s US$38.5 billion (S$50 billion) cash bid, rejecting an offer that would have been the largest-ever foreign buyout of a Japanese company.

7-Eleven operator Seven & i said the takeover proposal was not in the best interest of shareholders and was likely to face significant antitrust challenges in the United States, where the combined company would be the convenience store industry’s biggest by a considerable margin.

Seven & i, which said in August it had received an offer from Circle K owner Couche-Tard without naming the price, disclosed the bid was at US$14.86 a share and said it was open to “sincerely consider” any proposals.

But it would “resist any proposal that deprives our shareholders of the company’s intrinsic value that fails to specifically address very real regulatory concerns”, Seven & i said in a letter addressed to Couche-Tard.

Seven & i shares were trading about 0.3 per cent higher at 2,157 yen on Sept 6, above the value of the US$14.86 per share proposal. The stock traded at 1,761 yen before Couche-Tard’s approach was announced on Aug 19.

Couche-Tard shares have fallen about 8 per cent since its proposal to Seven & i was made public.

Seven & i said that if Couche-Tard were to increase the value of the offer “very significantly”, it would still be concerned over whether a takeover would be able to progress given US competition laws.

Mr Travis Lundy, an independent analyst who publishes on Smartkarma, said there still appeared to be room for Couche-Tard to improve its proposal.

“It was an opening salvo,” he said. “Everyone knows it wasn’t their last and best offer and wasn’t going to be fully fleshed out.”

While Seven & i is much larger than Couche-Tard in terms of sales, stores and employees, its shares have underperformed for years, drawing complaints from investors, including ValueAct Capital, about the company’s management and asset structure.

Despite the rejection, Couche-Tard’s bid is the latest example of growing interest in Japanese firms from Western investors, who have been drawn by the country’s push for better governance.

A Seven & i takeover would eclipse the existing largest-ever foreign buyout in Japan – the US$18 billion purchase in 2018 of Toshiba’s memory chip business by a consortium led by private equity firm Bain.

The deal, if agreed, would allow Couche-Tard, which has a market value of about US$52 billion, to boost its global reach and improve economies of scale.

Yet it would almost certainly attract regulatory scrutiny in the US, analysts said, where grocery chain Kroger’s proposed US$25 billion merger with smaller rival Albertsons announced in 2022 was halted recently due to an antitrust lawsuit.

7-Eleven is the biggest US convenience store operator with a 14.5 per cent share of the market in 2023 and Couche-Tard’s brands had a 4.6 per cent share, according to analytics and consulting firm GlobalData.

Jefferies said in a note on Sept 5 that the combined company might require divestitures of stores in the US, mainly in the west, Midwest and central regions. REUTERS