Circle K owner still wants friendly 7-Eleven deal after $39bn offer rejected

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Canada’s Alimentation Couche-Tard has said it remains “highly focused” on pressing ahead with a friendly takeover of Seven & i Holdings, despite the Japanese convenience store giant’s rejection last week of a near $39bn preliminary offer.

Couche-Tard, owner of the Circle K convenience store chain, said on Monday it was prepared to have “collaborative and friendly discussions” with Seven & i for a deal that would be the biggest buyout of a Japanese company by a foreign group.

Shares of Seven & i, which have risen since Couche-Tard’s offer emerged in mid-August, jumped almost 3 per cent in Tokyo on Monday.

The Japanese owner of the 7-Eleven chain has a market capitalisation of ¥5.5tn ($39bn), slightly higher than the $38.7bn valuation placed on the company by Couche-Tard.

Couche-Tard’s statement comes after Seven & i last week laid out why a special committee set up to examine the bid had unanimously rejected the Canadian company’s approach, saying it was “opportunistically timed” and significantly undervalued the Japanese group.

Seven & i highlighted the need for deeper discussion of the central role that 7-Eleven stores play in Japan. The stores are designated as part of the social infrastructure needed to provide supplies and basic services in the event of an earthquake or other natural disaster.

It also said the proposal had not taken adequate account of the potentially significant competition issues a merger would encounter in the US.

After the market closed in Tokyo on Monday, Seven & i said it remained “open to engaging in sincere discussions should [Couche-Tard] put forth a proposal that fully recognizes Seven & i’s standalone intrinsic value and addresses the Special Committee’s very real regulatory concerns”.

Investors had taken Seven & i’s statement last week as leaving open the possibility of further discussions if Couche-Tard were to return with a higher offer.

“We are disappointed in 7&i’s refusal to engage in friendly discussions,” Couche-Tard said. “We are highly confident that collaborative discussions would lead to our ability to find increased value for 7&i shareholders.”

The Canadian group said its request for its advisers to engage with advisers to Seven & i had been rejected, along with its offer to enter a non-disclosure agreement with the Japanese group “to enable both sides to share information to find more value”.

Couche-Tard’s offer of $14.86 a share in cash gave Seven & i an estimated enterprise value of close to $60bn, according to analysts.

Couche-Tard said it remained “highly confident” it had “sufficient capacity to finance the transaction in cash”.

In response to Seven & i’s concerns about competition issues, Couche-Tard said the highly fragmented US convenience store market — where the two groups together represent more than 10 per cent of stores — would make it possible to “jointly consider divestitures that may be required to secure regulatory approvals”.

Couche-Tard also acknowledged that Seven & i played “an important role in Japan’s emergency response” and said it was committed to its “continuing to serve in this capacity”.