Dive Brief:
- Seven & i Holdings, parent company of 7-Eleven, has rejected a buyout offer from Alimentation Couche-Tard, saying the proposal “ grossly undervalues” the Japanese retail giant.
- Stephen Dacus, chairman of the board for Seven & i, said Friday in a letter that Seven & i felt that Couche-Tard, parent company of convenience store chain Circle K, failed to account for the regulatory challenges this buyout would face and did not fully understand the role Seven & i plays in everyday Japanese life.
- The initial bid, for $14.86 per share in cash, put the buyout price at nearly $39 billion.
Dive Insight:
After Couche-Tard publicly announced its bid for Seven & i on Aug. 19, the Japanese retailer formed a special committee headed by Dacus to consider the offer. According to Friday’s letter, committee members unanimously found the bid insufficient but remain open to further negotiation.
“We are open to engaging in sincere discussions should you put forth a proposal that fully recognizes our standalone intrinsic value and addresses our concerns regarding certainty of closing in the current regulatory environment,” wrote Dacus.
However, he added that the committee doesn’t feel that the initial offer “provides a basis for us to engage in substantive discussions regarding a potential transaction.”
Regulatory issues could prove a massive hurdle, especially in the U.S. Given that 7-Eleven and Couche-Tard are the two largest convenience retailers in the country, experts pegged the odds of a deal between the two going through at less than 50-50.
“Beyond your simple assertion that you do not believe that a combination would unfairly impact the competitive landscape and that you would ‘consider’ potential divestitures, you have provided no indication at all of your views as to the level of divestitures that would be required or how they would be effected,” Dacus wrote.
Even if the companies overcame these hurdles, Dacus said Seven & i’s place in Japanese life is “clearly an area that would require further discussion.”
While this was Seven & i’s first public statement on the bid since acknowledging the offer, it sought designation as a “core” company in late August. This designation would add an extra layer of oversight from the Japanese government.
