7-Eleven starts talks with ACT on $47bn takeover bid as ‘white knight’ emerges

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Seven & i Holdings has ended months of stonewalling and begun negotiations with Canada’s Alimentation Couche-Tard over a $47bn takeover bid for the 7-Eleven store owner, just as it received a rival buyout offer from members of the founding family.

The confirmation of long-awaited talks and a fresh twist in the form of a potential “white knight” bidder has added to the frenzy around a deal whose success would transform Japan’s market for corporate mergers and acquisitions.

The Canadian company’s interest in buying the world’s biggest convenience store operator dates back more than two decades. Its formal approach to Seven & i became public in August and, if successful, would be Japan’s biggest-ever takeover deal.

“Preliminary and limited” talks between the two companies’ advisers had begun, three people briefed on the matter said.

But even as those talks tentatively commenced, Seven & i said on Wednesday it had received a rival proposal for a potential takeover led by members of the company’s founding Ito family. It described the proposal as “confidential and non-binding” in a notice to the Tokyo Stock Exchange.

The proposal from Junro Ito, a son of the founder and a vice-president of the company, and Ito Kogyo, a company representing other members of the family, marks the first appearance of a potential white knight bidder for Seven & i, which has strongly opposed the Canadian approach.

Although no price has been disclosed in the statement to the stock exchange, the Ito proposal, according to people close to the situation, would require unprecedented levels of borrowing from Japan’s largest banks, along with equity investment from a domestic company. The Ito family collectively holds about 3.5 per cent of Seven & i. 

Itochu, one of Japan’s biggest trading houses and already the owner of the Family Mart convenience store chain, has been involved in talks over the new buyout proposal, according to people close to the situation. A spokesman for Itochu declined to comment, but people close to the company added that nothing had been decided.

Corporate lawyers and buyout experts said any involvement of Itochu could prove difficult: if it ultimately became the owner of Seven & i, it would control at least 65 per cent of Japan’s convenience store market by sales. Mitsui & Co, a trading house which does not own any convenience store chain, has also been linked to a possible offer. A spokesman for that company declined to comment on whether they were involved in talks with the Ito family.

The family’s new proposal is now under consideration by a special Seven & i committee, which is also still examining the Couche-Tard bid, which was raised to $47bn in September, after its original unsolicited $39bn bid was rejected for “grossly” undervaluing the Japanese company.

“We are committed to an objective review of all alternatives before us as we consider proposals from Mr Ito and Ito Kogyo, from ACT, as well as the company’s standalone opportunities to unlock shareholder value,” said Stephen Dacus, chair of the special committee and board of directors, in a statement on Wednesday.

The Ito family’s offer follows recent indications from four people close to the Japanese company that the founding family strongly opposed the idea of the country’s biggest retailer falling into foreign hands, and had been increasingly active in the search for a Japanese bidder.

Couche-Tard did not immediately respond to a request for comment. The Ito family could not immediately be reached for comment. Seven & i declined to comment on the talks.