Seven & i Holdings, the Japanese owner of the global 7-Eleven convenience store chain, has rejected a nearly $39 billion takeover offer from Canada’s Alimentation Couche-Tard, stating that the bid “grossly undervalues” the company. The offer, which values Seven & i at about $38.7 billion, represents a premium of roughly 21% as of August 15, but slightly below its stock price as of Friday. Seven & i said it is open to considering any proposal, but the offer from Couche-Tard is not in the best interest of its shareholders and stakeholders.
In a letter to Couche-Tard, Seven & i criticized the proposal as “opportunistically timed” and stated that it does not adequately acknowledge the challenges the transaction would face from U.S. competition law enforcement agencies. A tie-up 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 globally. However, this could trigger scrutiny from U.S. antitrust regulators, potentially forcing the sale of assets.
The potential deal between Seven & i and Couche-Tard marks a major test of Japan’s new guidelines to promote mergers and acquisitions in an effort to boost the country’s competitiveness. Seven & i has reportedly planned to seek government protection to defend itself against Couche-Tard’s bid, seeking to change its designation to “core” for national security under the Foreign Exchange and Foreign Trade Act. Seven & i was founded by the late Masatoshi Ito and is now owned by his children, who collectively own more than 10% of the company and have a combined net worth of $4 billion, according to Forbes.
Couche-Tard’s CEO-elect Alex Miller expressed confidence in financing the deal and stated that the company wants to engage with Seven & i constructively. However, Seven & i has raised concerns about the uncertainty of closing the deal and the potential challenges from U.S. competition law enforcement agencies. The rejection of the takeover offer comes as Seven & i has been facing pressure from activist investors calling for structural reforms to increase shareholder returns.
The deal, if it goes through, would be the biggest-ever foreign takeover of a Japanese company. This acquisition attempt comes at a time when Seven & i is looking to defend itself against Couche-Tard’s bid and navigate the challenges of U.S. competition law enforcement agencies. The rejection of the offer highlights the complexities and uncertainties involved in cross-border M&A transactions, especially in the retail sector where competition is fierce. Seven & i’s decision to reject the offer reflects its commitment to protecting the interests of its shareholders and stakeholders while navigating the changing landscape of the global retail industry.
