TheChek News Flow

Deal between convenience store groups would be biggest-ever unsolicited foreign bid for a Japanese company

The Japanese operator of 7-Eleven, the world’s biggest convenience store chain, has received a takeover approach from the Canadian retailer Alimentation Couche-Tard, which controls the Circle K brand.

Couche-Tard’s approach to Seven & i Holdings follows more than a year of on-off talks between the two retailers and is the biggest-ever foreign-led takeover attempt to target a Japanese company.

Seven & i’s shares rose 23 per cent on Monday, pushing the market capitalisation of the company to $39bn.

In a statement Seven & i said it had set up a special committee of non-executive board directors to examine the proposal from Couche-Tard, which seeks to acquire all its outstanding shares. The approach is the first to fully exploit recent changes in M&A guidelines to make it harder for Japanese company managements to ignore unsolicited or unwanted offers.

According to multiple people familiar with the matter, Seven & i has for some months been working with banking advisers including Morgan Stanley, to fortify itself against what it saw as the rising threat of a foreign-led acquisition.

Couche-Tard has been circling Seven & i for several years, making on-and-off contact with the Japanese company within the past two years in an attempt to open friendly deal discussions, say the same people.

The move from Couche-Tard, said banking sources, could also draw in other bidders for the company, including private equity groups which have long coveted the US network of 7-Eleven stores. News of the bid was first reported by the Nikkei.

Seven & i’s preparations for a potential takeover follow a pivotal revision last year of Japan’s merger and acquisition guidelines. The new wording strongly encourages companies to seriously consider any “bona fide” offers at the board level, ending decades where powerful chief executives could unilaterally reject bids against the interests of shareholders.

The change, say M&A bankers and lawyers, clears the way for foreign buyers to make unsolicited bids for more Japanese companies.

Seven & i has recently overhauled its board and attitude to corporate governance, they said, under pressure both from activist investor ValueAct, which made its stake in the group public in 2021, and Japan’s wider push to reform how companies engage with shareholders. The group’s founder Masatoshi Ito, a top shareholder, died last year.

Couche-Tard has engaged Goldman Sachs as its banking adviser. Morgan Stanley and Goldman declined to comment. Couche-Tard could not immediately be reached for comment.

If a deal with the Canadian group is completed it could face significant competition hurdles. After its acquisition of US petrol station group Speedway in 2021, 7-Eleven owns more than 13,000 stores in the US and Canada, while Couche-Tard has closer to 9,000. ValueAct has pushed for a spin-off of the 7-Eleven chain.

In response to the pressure for reform, Seven & i has also expanded internationally and shed less profitable businesses. It sold its Sogo & Seibu department store to Fortress Group last year.

Couche-Tard has been on the hunt for global acquisitions. The group has completed multiple takeovers over the past decade in the fragmented convenience store sector. It tried and failed to buy France’s Carrefour supermarket chain for €16.2bn in 2021.

Couche-Tard also bid for Speedway, which was eventually acquired by Seven & i for $21bn.

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- I don't like, as you know, tying our hands ahead of time when we got a lot of data to come in

- We're not in elections business

- I think it's a valid caution when rates are this high, if you take measure of how tight the Fed is as just a What's the rate minus what's the inflation rate, when you set a rate high like we have, and hold it there while inflation falls, you're actually tightening

- When you see consumer credit delinquencies, credit card delinquencies rising like they've been rising, those are warning signs. Now there's, there's some others that are more positive, but they're, they're definitely of concern

- If you keep too tight for too long, you will have a problem on the employment side of the Fed's mandate

Number of potential buyers contacting estate agents about homes for sale during August rose 19%

U.K. property demand rose after the Bank of England’s rate cut in August, while the average price of property coming to the market fell from July’s average price, according to data from Rightmove.

The U.K. property website said the bank’s first-rate cut in four years spurred an uptick in market activity, with a 19% increase in the number of potential buyers contacting estate agents about homes for sale during August compared with the same month a year ago.

“The first Bank of England rate cut for four years at the start of the month has helped to accelerate mortgage rate drops and contributed significantly to improved buyer demand,” Rightmove said.

In July, the increase was 11% on the same month last year.

Meanwhile, the average asking price for new sellers fell 1.5%, or 5,708 pounds ($7,337) to 367,785 pounds, matching the long-term average as prices have declined from July to August for the past 18 years.

“While mortgage rates aren’t yet substantially lower since the rate cut, the fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment,” Rightmove’s director of property science, Tim Bannister, said.

Rightmove expects a further increase in activity during the Fall following the rate cut, and, as such, raised its full-year forecast to a 1% rise in new seller asking prices, from a previously forecast 1% fall.

However, although buyers and sellers are more optimistic about the outlook of the market, mortgage rates are still very high compared with a few years ago, stretching affordability.

A few more cuts to the central bank rate will likely be necessary to see a more substantial reduction in mortgage rates, Bannister said.