Canadian convenience store giant Alimentation Couche-Tard Inc., which owns the Circle K chain, is pushing on with its attempt to purchase rival Seven & i Holdings Co. despite a competing offer from the Japanese company's founding family.ETIENNE LAURENT/AFP/Getty Images
Canadian convenience store giant Alimentation Couche-Tard Inc. ATD-T says it’s pushing on with its effort to take over Japanese rival Seven & i Holdings Co., undeterred by a competing offer from a member of Seven’s founding Ito family.
“We will be persistent and continue our friendly approach to creating what we see as the most compelling outcome for all shareholders, employees and key constituencies of both companies,” Couche-Tard chief executive Alex Miller told analysts Tuesday on a call to discuss the company’s second-quarter results.
“We continue to see a strong opportunity to grow together,” Mr. Miller said. “We also remain confident in our ability to finance and complete this combination.”
Couche-Tard, which owns the Circle K chain, is now offering about US$47-billion to acquire Seven & i and its global network of 7-Eleven stores. It sees a merger as a way to improve its fresh food offering and become a stronger retailer in what remains a fragmented industry, particularly in the United States.
Seven’s founding Ito family, which holds a roughly 8-per-cent stake in the Japanese retailer, appears unwilling to sell, however. It is now seeking to counter Couche-Tard’s approach with a management buyout proposal that Bloomberg reports is worth around 9-trillion yen (US$58.7-billion).
A special committee of Seven & i directors is reviewing the options, including Couche-Tard’s offer as well as the non-binding and confidential proposal received from Junro Ito, a Seven & i vice-president and director. Mr. Ito’s father, the late Masatoshi Ito, built the retail empire that owns 7-Eleven.
Couche-Tard appears willing to play the long game. Company executives told Japanese media last week that they believe their offer is attractive and that they do not intend to go hostile in trying to take over Seven, which could involve wooing Seven shareholders or trying to win board seats.
The emergence of an offer led by the Ito family, though, reflects the belief by some Japanese powerbrokers that the country’s biggest retailer should not fall into foreign hands. Couche-Tard’s bid is the biggest ever from a non-Japanese company for a Japanese target.
Mr. Ito is working with trading and investment conglomerate Itochu on the offer and has the support of three of Japan’s largest banks, according to Japanese media reports. Itochu owns FamilyMart, Japan’s second-biggest convenience store chain behind 7-Eleven.
Seven & i controls the 7-Eleven chain’s 85,000 stores around the world as well as a series of other assets, including a bank, life insurance units and credit-card businesses. The company has suffered from underperformance for years, and investors have long complained that the board has been slow to address the challenges.
Couche-Tard has performed much better, and appears to be taking share from its competitors, especially 7-Eleven, Stifel analyst Martin Landry said in a report Monday. Still, like many other retailers, the company’s same-store sales growth is under pressure as low-income consumers in the United States, Europe and Canada spend less on gasoline and in-store merchandise.
Couche-Tard reported net earnings of of US$709-million, or 75 US cents per share, for the quarter ended Oct. 13 on revenue of US$4.4-billion. On an adjusted basis, earnings per share was 74 US cents, down 10 per cent year-over-year and slightly below analyst forecasts.