By Ritsuko Shimizu and Kane Wu

TOKYO (Reuters) – Japan’s Seven & i Holdings has received a buyout proposal from a member of its founding Ito family, it said on Wednesday, following a report that the 7-Eleven owner was considering a management buyout offer worth up to $58 billion.

The offer from Ito-Kogyo, a company linked to Vice President Junro Ito and a top shareholder, is non-binding and is being reviewed by a special committee set up by Seven & i to look at a rival offer from Canada’s Alimentation Couche-Tard.

No decision has been made regarding the management buyout proposal, the Japanese retailer said in a statement. Bloomberg News earlier reported Seven & i was considering a management buyout offer (MBO) worth up to 9 trillion yen ($58 billion), including some 6 trillion in financing.

At that size, the deal would be the largest MBO in history, eclipsing the $32.9 billion paid for U.S. hospital company HCA in 2006 when its founder teamed up with private equity heavyweights KKR & Co and Bain Capital.

Seven & i’s shares surged in afternoon trade after having been suspended earlier in the day to close up 12%, valuing it at around $42 billion.

The sprawling Japanese retailer has been under pressure to deliver more for shareholders after Circle K owner Couche-Tard emerged in August with a takeover bid that sources say it has since sweetened to $47 billion.

Going private would allow Seven & i to continue under current management and remove pressure from shareholders to sell off more of its assets – as well as eliminate the threat from Couche-Tard.

The fact that Seven & i has received an official management buyout proposal was a sign “funding of a certain quality is in place,” said analyst Travis Lundy of Quiddity Advisors, who publishes on Smartkarma.

Lundy noted however that the size of the buyout was not yet clear. The Nikkei newspaper earlier put the value of the buyout at more than 6 trillion yen.

Ito-Kogyo owned 8.2% of Seven & i as of August, making it the second-largest shareholder, according to a regulatory filing.

Couche-Tard representatives were not immediately available for comment.

BREAK-UP PRESSURE

Whether Couche-Tard manages to make good on its dream of creating a global convenience store powerhouse or management ultimately pulls off a buyout, the struggle for Seven & i suggests investors face increased competition and may have to pay more to secure deals in Japan.

Any transaction would only underscore the almost unprecedented level of interest in Japan deals from foreign investors after a regulatory overhaul lit a fire under companies to improve governance and convinced investors that better returns are ahead.

Japanese banks Sumitomo Mitsui, Mitsubishi UFJ and Mizuho were in talks to lend a combined 6 trillion yen to Seven & i, according to Bloomberg News, adding that trading house Itochu could also take part in the acquisition.

Representatives for the three banks and Itochu declined to comment.

Seven & i has come under considerable pressure from foreign shareholders in recent years, with some pushing for a break-up of the company. In turn, it has been trying to convince investors that it can deliver long-term growth on its own.

Under a restructuring announced last month, it aims to split off its supermarket operation and some 30 other “non-core” units into a holding company.

While the Japanese 7-Eleven convenience stores are a money-spinner, the company has been hobbled by poor performance at its supermarkets, including Ito Yokado stores which are a major part of the holding company it formed decades ago.

($1 = 154.73 yen)

(Reporting by Ritsuko Shimizu, Kane Wu, Anton Bridge and Miho Uranaka; Writing by David Dolan; Editing by Chang-Ran Kim and Edwina Gibbs)

---