Why 7-Eleven owner Seven & i’s buyout would be a watershed moment for Japanese takeovers
- Couche-Tard, the Canadian owner of the Circle-K chain, has made a preliminary proposal to buy Seven & i Holdings, which could be worth US$38.4 billion
Alimentation Couche-Tard’s proposed acquisition of Seven & i Holdings, if successful, wouldn’t just be the largest takeover of a Japanese company, it would also be extremely rare.
The Canadian convenience store chain operator’s preliminary proposal to buy 7-Eleven owner Seven & i Holdings could be worth more than ¥5.63 trillion (US$38.4 billion), based on the Japanese company’s market value after news of the potential deal was disclosed. Couche-Tard owns the Circle K chain.
Until now, an attempt to acquire such a well-known Japanese business at such scale would have been dismissed as audacious and unlikely, given the protectionist tendencies of the government and corporate boards prioritising stability over shareholder value. But the tide may be turning, with new corporate guidelines aimed at injecting more vigour into corporate Japan through improved governance and protections for investors.
It’s not clear yet how much Couche-Tard, which is smaller than Seven & i, may propose to pay and structure any potential deal, or whether it is seeking a partial buyout. Still, the Canadian company’s plan will benefit from a potential ally: ValueAct Capital Management.
The activist fund has been pushing Seven & i’s management to narrow its focus to 7-Eleven stores, saying last year that they would be worth more as a standalone listed company, and sought to replace CEO Ryuichi Isaka. In response, he has taken restructuring measures and initiated a buy-back. But given the reaction among investors who bid up the company’s shares by 23 per cent on Monday when the news broke, a record one-day gain for the stock, it may be hard to justify any resistance to a takeover proposal.
“The main implication is that the stock is clearly undervalued,” said Rafael Nemet-Nejat a senior portfolio manager at Jin Investment Management Pte. The proposal “may also put pressure on the company to speed up restructuring as well, as the management is likely reluctant on foreign buyouts.”
