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The board of Seven & i Holdings is poised to reject an opening takeover offer from Canada’s Alimentation Couche-Tard, and its pursuit of Japan’s biggest-ever buyout by a foreign company.
According to three people close to the Japanese operator of the 7-Eleven convenience store chain, a special committee set up by Seven & i to examine Couche-Tard’s bid last month will describe the offer as insufficient and raise concerns that the deal would trigger competition investigations from regulators.
In a response to Couche-Tard that the same people said could be sent as soon as Friday, the Japanese company will leave open the opportunity for the Canadian group to return with a higher offer, and keep the process running on a friendly basis for now.
Couche-Tard’s bid for Seven & i came to light on August 19, but both companies have since shared almost no details on the nature or price of the offer. Seven & i’s market capitalisation on the final day of trading before the bid became known was $31bn. That has since risen to $39.2bn, as the market digests various theories on how large a premium Couche-Tard would need to pay to pull off the most audacious bid in Japanese market history.
People close to the special committee, which comprises an unnamed group of independent board members, said it argued that Couche-Tard’s non-binding bid for a full takeover of Seven & i had materially misvalued significant parts of the Japanese retail giant’s empire, which consists of more than 100 group companies including a global convenience store chain, restaurants and banking services.
People close to the Seven & i board said opinion on the bid had been divided within the special committee, and that at least one member had opposed the Canadian offer not just on price but for reasons of “economic security”.
Analysts covering the company have speculated that its management, in defending Seven & i against a buyout, would attempt to present the domestic 7-Eleven stores as indispensable social infrastructure in a country prone to natural disasters.
As well as representing the largest takeover bid by a foreign company, Couche-Tard’s bid for Seven & i has broken new ground for being unsolicited. The offer follows years of stop-start progress on corporate governance reform in Japan, which has put boards under greater pressure to prioritise shareholders’ interests.
New mergers and acquisitions guidelines from the government, which came into force last year, seek to establish a best practice along the lines of what Seven & i has now done: respond to a bona fide takeover offer by establishing a special committee to report to the board.
In a statement, Seven & i said that as a general policy, it did not comment on market rumour and that it would promptly make an announcement when it had matters to be disclosed. Couche-Tard declined to comment.
The story was first reported by the Nikkei.
