7-Eleven Parent Rejects $39 Billion Buyout Offer by Circle K Owner
Seven & i Holdings says price is too low, and markets watch for possible raised bid
TOKYO—The Japanese company that operates 7-Eleven convenience stores worldwide has rejected a $39 billion takeover offer by the Canadian owner of Circle K stores, saying the bid is too low.
Tokyo-based Seven & i Holdings SVNDY -3.90%decrease; red down pointing triangle said Friday the offer by Canada’s Alimentation Couche-Tard ATD 1.32%increase; green up pointing triangle significantly underestimated the value of the company and its potential. Seven & i also said the proposal didn’t sufficiently address regulatory issues including a possible antitrust challenge in the U.S., where both companies have large store networks.
Alimentation Couche-Tard offered to acquire all shares outstanding of Seven & i at $14.86 a share in cash, according to Seven & i. That would put the value of the deal at about $38.7 billion.
The approach by Couche-Tard proposed bringing together two of the world’s biggest convenience retailers. The 7-Eleven chain is a fixture of everyday life in Japan and other Asian countries, as well as a household name and cultural touchpoint in the U.S.
Couche-Tard, or “night owl” in French, has been snapping up competitors around the world and now runs thousands of stores in North America, Europe and Asia. Its best-known brand in the U.S. is Circle K.
The bid is a rare attempt by a foreign company to gain control of one of Japan’s biggest and best-known companies. Japanese officials have told companies that they need to take acquisition proposals seriously, rather than quash them without a response as was the custom for many years.
In line with the government’s guidance, Seven & i set up a special committee of outside directors headed by veteran retail executive Stephen Hayes Dacus to examine the offer, and it said it was open to any proposal that would benefit Seven & i shareholders and other stakeholders.
However, the Japanese company said in a letter to Couche-Tard, “we will resist any proposal that deprives our shareholders of the company’s intrinsic value or that fails to specifically address very real regulatory concerns.”
A representative of the Canadian company didn’t respond to a request for comment.
Seven & i shares swung after Friday’s announcement, rising early in the trading session before falling back. The shares were trading at 2,127 yen, equivalent to $14.88, in the afternoon. The stock price closed at ¥1,761 on the last trading day before the offer’s existence was made public.
Masayuki Kubota, a strategist at Rakuten Securities, said he believed the Seven & i board had a strong argument that an acquisition would be a “shackle on Seven & i’s ability to grow.”
Although both companies operate convenience stores, Couche-Tard’s revenue largely comes from gas stations in North America, while Seven & i has expertise in food products and logistics, Kubota said. Because of the different business models, Couche-Tard’s management wouldn’t necessarily be able to improve Seven & i’s results, he said.
Seven & i has faced pressure from some foreign shareholders in recent years to raise profitability and focus on its core convenience-store business. In response, the company has shed some other businesses. It sold department store operator Sogo & Seibu last year and is considering listing its supermarket business.
Masahiro Ichikawa, a strategist at Sumitomo Mitsui DS Asset Management, predicted Couche-Tard would return with a higher offer. “The ball is now in the hands of the acquirer,” he said.