7-Eleven Owner Declines $38 Billion Takeover Proposal from Canadian Rival

Seven & i Holdings, the Japanese conglomerate that owns the global convenience store chain 7-Eleven, has turned down a $38 billion (£29.2 billion) acquisition offer from Canadian competitor Alimentation Couche-Tard. The proposal, which was intended to create a colossal global convenience store network, was rejected by Seven & i on the grounds that it “grossly” undervalued the company and posed significant regulatory risks.

In a formal response to Alimentation Couche-Tard (ACT), Seven & i Holdings criticized the bid as opportunistic and undervaluing the retail giant’s potential. The letter, penned by Stephen Dacus, chair of Seven & i’s board, highlighted that the offer did not reflect the true worth of the company or its ability to generate value for shareholders. Dacus also pointed out that the timing of the bid seemed calculated to exploit current market conditions, particularly given the Japanese yen’s depreciation against the US dollar, which has made Seven & i more affordable to foreign buyers.

Seven & i’s response indicates that while the company has rejected the current offer, it remains open to further negotiations and is willing to consider a more attractive proposal. Should the acquisition proceed, it would result in the formation of a new global convenience store behemoth, with a combined total of approximately 100,000 locations worldwide.

Alimentation Couche-Tard, headquartered in Quebec, operates around 17,000 stores under the Circle K and Couche-Tard brands across North America, Europe, and Asia. Their initial offer valued Seven & i at $14.86 per share, representing a premium of more than 20% over the company’s share price prior to the bid announcement.

However, the proposal faces significant hurdles beyond Seven & i’s objections. The company has raised concerns about the numerous regulatory challenges a deal would encounter, particularly from US competition regulators. The acquisition of such a major Japanese entity by a foreign company would be unprecedented. Historically, Japanese firms have been more inclined to acquire businesses abroad rather than be acquired themselves.

Neil Newman, head of strategy at Astris Advisory Japan, suggested that the rejection of the offer reflects Japan’s broader approach to protecting its national assets. “Japan needs to protect its national assets,” Newman noted, emphasizing that Seven & i is a key asset in the Japanese retail landscape. He also indicated that if the acquisition were to succeed, it would signal Japan’s openness to foreign investment and its willingness to engage with global business opportunities.

In addition, the Japanese government recently introduced new guidelines on mergers and acquisitions, urging companies to give sincere consideration to credible takeover offers rather than dismissing them outright. This shift in policy highlights Japan’s evolving stance on foreign investment and the importance of thorough evaluations of potential deals.

Seven & i Holdings operates 7-Eleven, the world’s largest convenience store chain, with 85,000 outlets spanning 20 countries and territories. If ACT’s bid had succeeded, it would have significantly expanded the company’s presence in the US and Canada, more than doubling its footprint in these regions to around 20,000 locations.

As the discussions continue, it remains to be seen whether a revised offer will be forthcoming or if Seven & i will seek alternative strategic paths. For now, the proposed acquisition has spotlighted the complexities involved in cross-border deals and the intricate balance between company valuations and regulatory scrutiny.