Seven & i Holdings Co rejected a US$38.7 billion takeover proposal from Alimentation Couche-Tard Inc as too low and fraught with regulatory risk while signaling a willingness to consider a sweetened offer.
The operator of 7-Eleven shops published a letter outlining its response following a review of the proposal by a committee of independent outside directors.
“We are open to sincerely consider any proposal that is in the best interests of Seven & i shareholders and other stakeholders,” Stephen Dacus, chair of the special committee appointed by Seven & i’s board, wrote in the letter. “However, we will resist any proposal that deprives our shareholders of the company’s intrinsic value or that fails to specifically address very real regulatory concerns.”
Photo: Reuters
Couche-Tard and Seven & i disclosed the Canadian company’s approach on Aug. 19, but had not yet given details of the potential offer, which valued Seven & i at about US$14.86 per share, indicating a market value of ￥5.55 trillion (US$38.7 billion). While that represents a premium of 21 percent since the proposal was disclosed, it is below a recent one-year peak seen in February.
“We do not believe, for several critical reasons, that the proposal you have put forward provides a basis for us to engage in substantive discussions regarding a potential transaction,” Seven & i said in the letter. “Your proposal is opportunistically timed and grossly undervalues our standalone path and the additional actionable avenues we see to realize and unlock shareholder value in the near to medium-term.”
Seven & i told Couche-Tard that its bid does not reflect the value of its business and growth strategy. The Japanese chain also raised concerns about breaching US antitrust laws in the letter.
“While none of this sounds particularly positive, Seven & i is at least opening to door to further negotiations, which at the very least demands a higher bid,” Ortus Advisors Pte strategist Andrew Jackson said.
Alex Miller, Couche-Tard’s chief operating officer and soon-to-be CEO, told analysts on the company’s earnings call Thursday that it wants to engage constructively with Seven & i and that it is confident it can finance the deal.
The proceedings are being closely watched at home and abroad as a test of new government guidelines on mergers and acquisitions instructing companies to seriously consider takeover offers.
A deal between the two companies could create a global convenience store behemoth with more than 100,000 stores. That could invite scrutiny from US competition authorities. Another potential obstruction for the takeover is that the Japanese government can block the deal or ask for changes in the terms.
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