Seven & I Holdings (HD) announced on the 19th that it has received a non-binding initial acquisition proposal from Canadian convenience store giant Alimentation Couche-Tard.
Seven & I HD has established a special committee composed of external directors to examine the acceptability of the acquisition proposal. The “Guidelines for Corporate Acquisitions” formulated by the Ministry of Economy, Trade and Industry in 2023 stipulates that when receiving an acquisition proposal to obtain management control, it should be submitted to or reported to the board of directors as a general principle. Moreover, if the acquisition proposal contains specific and legitimate content, companies are encouraged to conduct “serious consideration.”
Couche-Tard confirmed that it made a “non-binding friendly proposal” to Seven & I HD, but did not disclose any details. It also stated that it is uncertain whether an agreement would be reached.
The acquisition proposal was first reported on the same day by the Nikkei. Following the reports and announcement, the stock price surged significantly, closing at 2161 yen, a 23% increase from the previous day, marking the largest increase since September 2005 recorded by Bloomberg. The current market capitalization is about 5.6 trillion yen, which, if realized, could be the largest scale of acquisition of a Japanese company by a foreign entity in history.
Amir Ambarzadeh, a strategist at Asymmetric Advisors, pointed out that “the weak yen is a major incentive.” He assessed the high value of Seven & I HD’s convenience store business, stating, “If we can sell Ito-Yokado and Denny’s, it would maintain strong performance over a long period.”
Seven & I HD has been facing increasing external pressure, such as being urged by activist shareholder ValueAct Capital Management to sell Ito-Yokado last year, and has also been considering the realization of an IPO for its supermarket business.
On the other hand, in its overseas convenience store business, positioned as a pillar for future growth, it has actively expanded its share through M&A, including the acquisition of American Speedway for over 2 trillion yen.
Views on Difficult Realization
According to Bloomberg data, Couche-Tard operates about 9,000 convenience stores in North America. Including the “Circle K” brand, the total number of stores worldwide exceeds 14,000.
Couche-Tard has also been proactive in acquisitions, having made a proposal to acquire French retail giant Carrefour in 2021, but ended discussions due to strong opposition from the French government. Recently, it has acquired a gasoline station network in Europe from French oil giant TotalEnergies.
Mr. Ambarzadeh noted that as the acquisition price is not yet clear, there is little room for speculation about the scale of the acquisition, suggesting that depending on the premium, 7 trillion yen might be possible.
Past large-scale acquisitions of Japanese companies by foreign firms include Hon Hai Precision Industry’s investment in Sharp, which was approximately 400 billion yen.
Mio Kato, an analyst at Lightstream Research, expressed the view that given Couche-Tard’s financial situation, making a strong proposal might be challenging, adding that Seven & I HD is unlikely to sell unless there is an attractive cash offer, and therefore, the likelihood of something happening is quite low.
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Original Title: Couche-Tard Seeks to Buy $31 Billion Owner of 7-Eleven Chain (1) (excerpt)
(We will update with Couche-Tard’s comments added in the third paragraph)