Seven & i to ask Couche-Tard to reconsider ‘inadequate’ offer, source says

9:08 am Thursday, September 05th, 2024

By Rocky Swift and Ritsuko Shimizu

TOKYO (Reuters) -Japanese retail giant Seven & i will inform Canada’s Alimentation Couche-Tard that its takeover bid price is “inadequate”, a source familiar with the matter said on Thursday.      

Seven & i will ask Couche-Tard to reconsider its takeover bid, also referring to competition law concerns mainly in the U.S., although the company does not reject the offer and will continue to talk with the suitor, the source said.

The company’s board will send a letter to Couche-Tard as early as Friday, according to the Nikkei business daily, which reported the news first.

The Nikkei said Couche-Tard offered roughly 6 trillion yen ($41.81 billion) when it made its proposal in July.

News of Couche-Tard’s approach for the global operator of the 7-Eleven convenience store chain, which would be the largest foreign takeover of a Japanese company, pushed Seven & i shares up almost 23% on Aug. 19.

A Seven & i spokesperson declined to comment. Couche-Tard’s new CEO Alex Miller said on a post earnings call the company was looking forward to engaging with Seven & i constructively.

Seven & i, with a market valuation of about 5.6 trillion yen ($39 billion), previously said it formed a special committee to review the proposal, whose value or terms have not been disclosed.

Couche-Tard, which operates Circle-K convenience stores, is valued at about $52 billion.

While Seven & i is much larger than Couche-Tard in terms of sales, stores, and employees, its shares have underperformed for years, drawing complaints from investors including ValueAct Capital about the company’s management and asset structure. 

U.S. fund Artisan Partners, which holds about 0.85% of Seven & i’s outstanding shares, said last week that Couche-Tard could enhance the Japanese company’s corporate value and called on its management to respond to the offer by Sept. 19.   

The bid for Seven & i is the latest example of the growing interest in Japanese companies by Western investors, who have been drawn by the country’s push for better governance and a slide in the yen.

Foreign acquisitions of Japanese companies doubled to about 902.2 billion yen ($6.2 billion) in the first half of the year compared with the same period last year, according to LSEG data.

($1 = 143.4900 yen)

(Reporting by Kiyoshi Takenaka, Kantaro Komiya and Ritsuko Shimizu, additional reporting by Ananya Mariam Rajesh; Writing by Rocky SwiftEditing by David Goodman and Sharon Singleton)