Seven&i Spurns $38 Billion Takeover Bid from ACT

Seven&i, Japan’s leading diversified retail holdings company which owns 7-Eleven stores, on Friday rejected a proposal from Canadian convenience store Alimentation Couch-Tard (ACT) Inc, to acquire 7-Eleven for $38 billion.

ACT, which owns the Circle K chain, announced the surprise $38 billion non-binding and preliminary proposal bid a fortnight ago to acquire all outstanding shares of 7&i for $14.86 per share in cash. If materialised, the deal would have been the largest takeover of a Japanese corporate in history.

In a letter to ACT chairman Alain Bouchard, Seven & i chairman Stephen Hayes Dacus said that the offer was opportunistically timed and grossly undervalued the company’s intrinsic value and failed to take into account the competition concerns of the US regulators.

Dacus said that on receipt of the proposal, the 7&i Board formed a Special Committee comprised solely of independent outside directors to review your proposal and conducted a comprehensive review of your proposal over the course of multiple meetings.

“After a thorough review and discussion of your proposal, the 7&i Board has unanimously concluded that based on the unanimous recommendation of the Special Committee, that the proposal is not in the best interest of 7&i shareholders and other stakeholders. We are open to engaging in sincere discussions should you put forth a proposal that fully recognises our standalone intrinsic value and addresses our concerns regarding certainty of closing in the current regulatory environment, Ducas said.

Ducas also said that they did not believe, for several critical reasons, that the proposal provided a basis 7&I for us to engage in substantive discussions regarding a potential transaction.

The 7&i business is a unique asset and strategically positioned within the global convenience store sector. The Board is confident that it can realise and unlock shareholder value through a number of strategic actions, including but not limited to its US business, that they were pursuing actively.

The 7&i Board believed that even if ACT was able to improve the value element of the proposal very significantly, it did not adequately acknowledge the multiple and significant challenges such a transaction would face from US competition law enforcement agencies in the current regulatory environment and provided no certainty to closing.

“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 said in the letter.

No Timeline

There was also no mention about the timeline ACT needed to clear regulatory hurdles, or whether it would be prepared to take all necessary action to obtain regulatory clearance, including by litigating with the government.

“While you acknowledge the crucial role that 7&i plays in everyday life in Japan across food retail, banking and other services, this is clearly an area that would require further discussion should we reach that point,” Dacus said.

The 7-Eleven chain runs more than 7-Eleven has 85,000 shops worldwide in 20 countries including in the US and Canada, while Quebec-based ACT is listed on the Toronto Stock Exchange and runs around 17,000 shops in more than 30 countries and territories across North America, Europe and Asia under the Circle K and Couche-Tard brands. It has a stock market valuation of about $58.2 billion.