7-Eleven’s owner says the takeover bid “grossly undervalues” the company

The proposed acquisition of Seven & i Holdings would be the largest ever foreign takeover of a Japanese firm and would combine 7-Eleven, Circle K and other brands in Asia, North America and Europe.

As the world’s largest convenience store chain, 7-Eleven operates more than 85,000 stores globally.

Although the brand started in the United States, since 2005 it has been wholly owned by Seven & i.

A letter from Seven & i’s board to Alimentation Couche-Tard (ACT) said it was open to “engaging in frank discussions if you present a proposal that fully recognizes our intrinsic value in its own right”.

“We do not believe, for several key reasons, that the proposal you have submitted provides us with a basis to engage in substantive discussions regarding a potential transaction,” it said.

ACT operates more than 16,700 points of sale in 31 countries and territories.

The purchase of Seven & i would be the largest ever foreign takeover of a Japanese firm and would create a huge international store combining 7-Eleven, Circle K and other brands from Asia, North America and Europe.

Seven & I said ACT offered $14.86 per share in cash, which roughly matches its market value of $39 billion.

But the board’s letter called the proposal “opportunistically timed” and said it “significantly understates our independent path and the additional paths we see to realize and unlock shareholder value.”

It also raised regulatory issues.

“Your proposal does not adequately recognize the multiple and significant challenges such a transaction would face from US competition enforcement agencies,” it said.

A quarter of 7-Eleven stores are located in Japan, where they are a beloved institution, selling everything from concert tickets to pet food and fresh rice balls.

Seven & i Holdings’ other businesses include a major supermarket operator, restaurant chain Denny’s and Tower Records – a once-popular US record store that went bankrupt.

Seven & i would have asked the Japanese government to designate parts of the company as “core”, which would make a takeover more difficult.

Brands rated “core” in Japan include nuclear, space, rare earth and chip manufacturers, as well as cyber security and infrastructure operators.

The Canadian firm, however, is confident it can get its way.

CEO Brian Hannasch said in an earnings briefing in New York on Thursday that Couche-Tard could “even consider higher leverage if needed,” indicating it has the ability to raise several funds, according to Nikkei Asia.

“We have a solid and robust balance sheet,” Nikkei quoted Hannasch as saying.

Shares in Seven & i fell 1.9 percent in Tokyo on Friday.

Recommended reading:
In our new special edition, a Wall Street legend gets a makeover, a tale of crypto iniquity, poultry misbehavior and more.
Read the stories.