Customers leave a 7-Eleven supermarket, operated by Seven & i Holdings Co., in Kobe, Japan, on Friday, August 30, 2024. Alimentation Couche-Tard Inc. had made a preliminary non-binding proposal to buy Seven & i, which operates more than 85,000 stores around the world, and the deal would be the largest foreign acquisition of a Japanese company ever. Photographer: Soichiro Koriyama/Bloomberg via Getty Images
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Seven & i Holdings has rejected the takeover bid of the Canadian supermarket chain Food Couche-Tardand says the offer is “not in the best interests” of its shareholders and stakeholders.
In a file On the Tokyo Stock Exchange, 7-Eleven’s owner revealed that Couche-Tard had offered to acquire all of Seven & i’s outstanding shares for $14.86 per share. According to data from LSEG, the offer price will value Seven & i at $38.55 billion.
Stephen Dacus, chairman of the special committee Seven & I formed to evaluate the Couche-Tard proposal, called the proposal “opportunistically timed and grossly undervalues our standalone path and the additional actionable opportunities we see to drive shareholder value to be realized and made available in the near future. to the medium term.”
In April, Seven & i announced a corporate restructuring plan aimed at increasing 7-Eleven’s global presence and divesting its underperforming supermarket business.
Dacus wrote that even if Couche-Tard were to increase its offer “very significantly,” the proposal does not take into account the “multiple and significant challenges” that would face taking over U.S. anti-competition agencies.
“Other than your simple statement that you do not believe a combination would have an unfair impact on the competitive landscape and that you would ‘consider’ potential divestitures, you have not provided any indication of your views on the size of divestitures that would be necessary or how they would be implemented,” he wrote in a letter that appeared to be addressed to ACT chairman Alain Bouchard and published in the Tokyo Stock Exchange filing.
He also pointed out that the Couche-Tard proposal did not indicate a timetable for clearing regulatory hurdles, nor that the company was “prepared to take action.” all necessary action to obtain regulatory approval, including by litigating with the government.”
Dacus said Seven&i is open to genuinely considering proposals that are in the best interests of the company’s stakeholders and shareholders, but warned that it will also oppose proposals that “deprive our shareholders of the intrinsic value of the company or that fail to specifically address the very real regulations. to assure.”
Shareholder speaks out
Speaking to CNBC’s “Squawk Box Asia” shortly before the response was filed on Friday, Ben Herrick, associate portfolio manager at Artisan Partners, said Couche-Tard’s offer “underlines the fact that this management team and board are not already have done everything possible’. everything in their power to increase the business value of this organization.”
Artisan Partners is an American fund that has a stake of just over 1% in Seven & i. The company did so in August reportedly insisted Seven & i Holdings must “seriously consider” the buyout offer and solicit offers for the company’s Japanese subsidiaries “as soon as possible.”
Herrick explained that Artisan has asked Seven & i to consider the offer because the fund believes capital allocation abroad has been overlooked.
He said Seven & i’s Japanese supermarket operations do not need much change, but said there is “huge opportunity” in international licensees operating outside the United States.
“You have over 50,000 stores, or about 50,000 stores generating about $100 million or a little over $100 million in operating profit for the company. So I think there’s a big mismatch there,” he said.
Herrick also thinks Seven & i has been slow to make changes due to inadequate oversight and accounting.
“We really need the company to execute its plan here more quickly [Seven and i President Ryuichi] Isaka came up with his 100-day plan to reform in 2016 [general merchandise store] Ito-Yokado. And we’re approaching day 3,000 here. So I don’t think speed has been a big part of this culture, and that has to change,” he emphasized.
On Monday, Richard Kaye, portfolio manager at independent asset management group Comgest, disagreed in an interview on CNBC’s “Squawk Box Asia.” He said, ‘I don’t think there is a case for radical reform by a foreign acquirer.”
The company is doing a “phenomenal job” in logistics and product innovation and “I think it’s very difficult to argue that it can do much better,” he added.