The Japanese owner of 7-Eleven, Seven & i Holdings, has turned down a $38 billion (£29.2 billion) takeover offer from Canadian company Alimentation Couche-Tard (ACT).
In a letter to the prospective buyer, Seven & i stated the offer “grossly” undervalued the company and posed significant regulatory risks.
Despite the rejection, Seven & i signaled its willingness to engage in further discussion. This indicates it would consider a revised proposal that better reflects the company’s value.
A Potential Convenience Store Giant
If the deal were to go through, it would create a global convenience store giant with a combined total of over 100,000 stores. ACT, the parent company of Circle K, operates around 17,000 outlets in North America, Europe, and Asia.
However, Stephen Dacus, chairman of Seven & i’s board, described the proposal as “opportunistically timed in his letter. He cited the company’s future potential to deliver more value to shareholders. Dacus emphasized that the bid undervalued Seven & i, especially given the company’s growth prospects.
Need Career Advice? Get employment skills advice at all levels of your career
The Offer Details
ACT’s initial offer valued Seven & i at $14.86 per share. This is more than 20% above the company’s share price before the offer was made public. The bid came at a time when the Japanese yen is significantly weaker than the US dollar. This makes Seven & i a more attractive target for foreign buyers.
Seven & i highlighted “multiple and significant challenges” the deal would face from US competition regulators. 7-Eleven holding the title of the world’s largest convenience store chain, boasting 85,000 locations in 20 countries. This means regulatory scrutiny is expected to be intense.
Expanding Footprint in North America
If the acquisition were successful, ACT’s presence in the U.S. and Canada would more than double, increasing its store count to approximately 20,000. This would significantly boost its footprint in North America, where ACT already operates under the Circle K and Couche-Tard brands.
However, the purchase of a major Japanese company by a foreign firm would be unprecedented, as Japanese corporations have historically been the buyers in international acquisitions.
Regulatory and Strategic Challenges
Neil Newman, head of strategy at Astris Advisory Japan, remarked on the broader implications of such a deal. “Japan needs to protect its national assets, and Seven & i is a major asset. Expect this to be a long, drawn-out process of negotiation.” He added that if the deal were to succeed, it would signal Japan’s openness to foreign investment.
In 2023, the Japanese government introduced new guidelines for mergers and acquisitions. They urge companies to carefully consider credible takeover bids rather than rejecting them outright. The guidelines aim to foster more openness in Japan’s corporate sector while ensuring national interests are protected.
Future Outlook
While Seven & i has rejected the initial offer, its openness to continued discussions suggests that further negotiations may follow. The potential merger could reshape the global convenience store landscape, but regulatory hurdles and national interests will likely play a significant role in determining the outcome.
ACT has not yet responded to the offer rejection, leaving the future of the deal uncertain as both parties navigate the complexities of a potential cross-border acquisition.
