Source – barrons.com
Seven and I Holdings, the parent company of 7-Eleven, has declined the takeover offer from Canadian convenience store operator Alimentation Couche-Tard (ACT), stating that the proposal “is not in the best interest” of its shareholders and stakeholders. In a filing with the Tokyo Stock Exchange, Seven & I disclosed that Couche-Tard had proposed an acquisition at $14.86 per share, but the offer was deemed inadequate.
Stephen Dacus, chairman of the special committee evaluating the offer, criticized the bid, calling it “opportunistically timed” and argued that it grossly undervalues Seven and I’s future potential. He further emphasized that the company has a solid standalone path for growth, particularly through its restructuring plan announced in April, which aims to expand 7-Eleven’s global presence while divesting underperforming assets like its supermarket business.
Regulatory and Strategic Concerns
Dacus also pointed out that Couche-Tard’s proposal lacked a clear strategy to address significant regulatory challenges. The potential acquisition could face scrutiny from U.S. anticompetition agencies, and Couche-Tard’s offer failed to provide details on how the necessary divestitures would be handled. The proposal also did not outline any timelines for obtaining regulatory clearance, leading Seven and I to question the seriousness of Couche-Tard’s commitment to overcoming these challenges.
Dacus did leave the door open for future proposals, stating that Seven and I is willing to consider offers that genuinely serve the company’s stakeholders and shareholders, but warned against any proposal that undermines the intrinsic value of the company or fails to address regulatory concerns adequately.
Seven and I Rejects Couche-Tard’s Takeover Proposal
Shareholder Reactions
Ben Herrick, associate portfolio manager at Artisan Partners, a U.S. fund with over a 1% stake in Seven & i, expressed frustration with the management’s handling of the company’s corporate value. Speaking on CNBC’s “Squawk Box Asia,” Herrick highlighted the need for Seven & I to reconsider the offer seriously, emphasizing that the fund believes the company has failed to maximize its value, particularly in international markets. He pointed out that while the company’s Japanese convenience store business is solid, there is a substantial opportunity for improvement in its international operations.
Artisan Partners had previously urged Seven & I to solicit offers for its Japanese subsidiaries and explore other avenues for capital allocation. Herrick also criticized the company’s slow pace in implementing reforms, calling for faster execution, particularly in revitalizing its general merchandise stores, a goal that has been delayed since 2016.
Counter Opinions
Not all shareholders agree with the push for reform or foreign acquisition. Richard Kaye, portfolio manager at Comgest, took a different stance in an interview on CNBC, arguing that Seven and I is already performing well, particularly in logistics and product innovation. He doubted that a foreign acquirer like Couche-Tard would significantly improve the company’s operations, stating that Seven & I is already doing a “phenomenal job.”
Conclusion
The rejection of Couche-Tard’s bid reflects Seven & I’s confidence in its ability to grow independently while addressing concerns from stakeholders. The ongoing debate between shareholders underscores the challenges facing the company as it navigates calls for faster reform and international expansion against the backdrop of global competition and regulatory hurdles.
