A 7-Eleven convenience store in Tokyo, on Sept. 9, 2024.RICHARD A. BROOKS/AFP/Getty Images
Canadian convenience store giant Alimentation Couche-Tard Inc. ATD-T is stepping up its efforts to take over the Japanese-owned 7-Eleven brand, with top executives flying to Tokyo this week to make their case in person after a white-knight bid by the Japanese chain’s founding family fell through late last month.
Couche-Tard founder and executive chairman Alain Bouchard, president Alex Miller and chief financial officer Filipe Da Silva are all in Japan this week and due to hold a news conference Thursday.
No announcement is expected at that event, with the Canadian executives instead planning to make their case to the Japanese media, which has so far largely reflected Seven & i Holdings Co. Ltd.’s skepticism and hostility to the proposed takeover.
In a statement Tuesday, Couche-Tard said it had “spent over six months attempting to enter fulsome, constructive, friendly discussions to reach a mutually agreeable transaction” with Seven & i, which operates 7-Eleven stores around the world.
“We remain focused on entering into these more fulsome discussions, and continue to be disappointed that engagement has been very limited, and focused only on the path to U.S. regulatory approval.”
Seven & i has been scrambling for alternatives since a bid by Junro Ito, son of founder Masatoshi Ito, fell through. Mr. Ito had reportedly been hoping to make a nine-trillion yen (roughly US$60-billion) offer to take the chain private, far more than Couche-Tard’s US$47-billion bid.
But Seven & i said in late February that Mr. Ito had been “unable to secure the financing required,” sending share prices plummeting and apparently clearing the decks for Couche-Tard, even as the Japanese company attempted to find an alternative plan to stave off the takeover.
Last week, Seven & i announced a two-trillion yen (US$13.5-billion) share buyback and said it would sell off some of its supermarket holdings and part of its stake in Seven Bank. It also named independent director Stephen Hayes Dacus – who had been overseeing a special committee considering the Couche-Tard bid – as the company’s first-ever non-Japanese chief executive officer.
Those proposals did not sit well with investors, however, and Seven & i’s stock price remains down since the Ito family bid fell through, trading at about 2,100 yen (US$14.30) Tuesday, well below the US$18.19 offer from Couche-Tard.
On Sunday, one of Seven & i’s most activist shareholders, U.S. fund Artisan Partners, said it opposed Mr. Dacus’s appointment, warning of “potential conflicts of interest” given his roles on the special committee and his own nomination committee, according to Japan’s Nikkei newspaper.
In a letter to company executives, the fund also demanded that Seven & i “fully and meaningfully engage” with Couche-Tard for its takeover bid, given its “poor performance in North America.”
Seven & i said Monday it was doing just that, while pushing back on Artisan’s criticisms, saying the company was “disappointed that Artisan has prejudged our commitment to pursuing all paths to unlock shareholder value without knowing all the facts.”
“The Special Committee continues to engage constructively with [Couche-Tard] and has not recommended to reject any third-party proposal,” said Paul Yonamine, chair of the committee since Mr. Dacus recused himself. “However, it has taken some time to get to that constructive engagement.”
Couche-Tard appeared to reject that framing Tuesday, however, criticizing Seven & i’s lack of engagement and focus on potential U.S. regulatory issues. The Canadian company said it was confident the deal “presents shareholders with a clear economic value, which stands in marked contrast to [Seven & i’s] repeatedly revised plan as announced last week.”
“Couche-Tard has a successful track record of working with U.S. and other regulators, in full compliance with applicable processes and requirements, to secure approvals of transactions,” its Tuesday statement said, adding that “contrary to assertions” from Seven & i, it had provided a “detailed proposal” on how to secure regulatory approval.
This includes, according to Couche-Tard, “a robust commitment on a specific base number of stores we would be willing to divest” and a “large reverse termination fee, structured to ensure Couche-Tard would be highly motivated to take additional actions as may be necessary in order to complete the transaction.”
“We firmly believe there is a clear path to regulatory approval in the U.S. The U.S. convenience store market is highly fragmented, with over 150,000 stores nationally,” the statement added. “Both Couche-Tard’s and [Seven & i’s] stores operate in the U.S. in competition with a wide array of brick and mortar and online food and merchandise providers. Additionally, [Seven & i] and Couche-Tard largely operate in complementary markets across the U.S.”
In a note, Chris Li, an analyst with Desjardins Research, said finding potential buyers for the U.S. stores that will be needed to be divested to meet regulatory approval “would increase the likelihood” of a successful takeover by Couche-Tard.
“However, it is possible that there could be other hurdles given the size and nature of this transaction,” he noted. “For this reason, we would still peg the likelihood of a deal to be at the lower end.”
Convincing Seven & i that a merger will not fall afoul of U.S. regulators is one thing, but Couche-Tard may also have to sell the Japanese government on the deal. Despite changes to acquisitions rules in recent years, foreign takeovers of Japanese businesses remain rare – particularly of brands so enmeshed in everyday life as 7-Eleven.
Couche-Tard’s last major takeover attempt, of French supermarket giant Carrefour, fell through in 2021 after Paris intervened to block the bid.
Japanese media has been broadly hostile to Couche-Tard’s offer – something Mr. Bouchard will be trying to address this week – and in January, Economy Minister Ryosei Akazawa suggested the Seven & i takeover could raise national-security concerns, given the role stores play in disaster relief efforts.
In its statement, Couche-Tard said it understands and respects “the role that [Seven & i] plays across Japan.”
“We are committed to further understanding the role [Seven & i] plays in the emergency response system and broader daily life. In a transaction, we would make a commitment to continue to operate in a consistent capacity for communities across Japan.”
With reports from Nicolas Van Praet