The Canadian retail behemoth Alimentation Couche-Tard made a buyout offer for 7-Eleven, which the Japanese company announced on Friday it had turned down, claiming the offer “grossly undervalues” the business.
The acquisition of Seven & i Holdings, which would merge 7-Eleven, Circle K, and other businesses throughout Asia, North America, and Europe, would be the largest foreign takeover of a Japanese company in history.
7-Eleven, the largest convenience store business in the world, has more than 85,000 locations worldwide.
Despite having its origins in the US, Seven & I has been the sole owner of the brand since 2005.
The Seven & I board expressed its willingness to “engage in sincere discussions should you put forth a proposal that fully recognises our standalone intrinsic value” in a letter to Alimentation Couche-Tard (ACT).
“We do not believe, for several critical reasons, that the proposal you have put forward provides a basis for us to engage in substantive discussions regarding a potential transaction,” it said.
ACT operates more than 16,700 outlets in 31 countries and territories.
Its purchase of Seven & i would be the biggest ever foreign takeover of a Japanese firm and create an international convenience store behemoth combining 7-Eleven, Circle K and other brands across Asia, North America and Europe.
Seven & i said ACT had offered $14.86 per share in cash, which roughly matches its market value of $39 billion.
But the board’s letter called the proposal “opportunistically timed” and said it “grossly undervalues our standalone path and the additional actionable avenues we see to realise and unlock shareholder value”.
It also raised regulatory concerns.
“Your proposal does not adequately acknowledge the multiple and significant challenges such a transaction would face from US competition law enforcement agencies,” it said.
A quarter of 7-Eleven stores are found in Japan where they are a beloved institution, selling everything from concert tickets to pet food and fresh rice balls.
Seven & i Holdings’ other businesses include a major supermarket operator, restaurant chain Denny’s, and Tower Records — a once-popular US record store that went bankrupt.
Seven & i has reportedly asked the Japanese government to designate parts of the company as “core”, which would make a takeover more difficult.
In Japan, companies in the nuclear, space, rare earth, and semiconductor industries, as well as those involved in cybersecurity and infrastructure management, are classified as “core” brands.
But the Canadian company is sure it can get what it wants.
It can raise more money, as CEO Brian Hannasch indicated when he said Couche-Tard may “even consider a higher leverage if needed” on Thursday at an earnings briefing in New York, according to Nikkei Asia.
According to Hannasch, “We have the solid and robust balance sheet,” as reported by Nikkei.
On Friday, Seven & I’s stock dropped 1.9% in Tokyo.
