Couche-Tard may find 7-Eleven bid more convenient
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Anshuman Daga
SINGAPORE, Aug 19 (Reuters Breakingviews) -Alimentation Couche-Tard ATD.TO may have better luck in Japan. After its bid to takeover Carrefour CARR.PA was essentially vetoed by the French government on food and security grounds in 2021, the Circle-K owner has made a preliminary takeover offer for Tokyo-listed Seven & i 3382.T, which operates the 7-Eleven convenience store chain, the target revealed on Monday. Fair M&A rules in the Asian country mean the Canadian buyer’s latest approach will be entertained at least.
Financial details, including an offer price, were not disclosed. Even so, news of the proposal sent Seven & i shares surging to their daily maximum of 23%, valuing the company at a near record high of $38 billion. The sharp reaction underscores how much value the market thinks there is to unlock. Any deal at this level would potentially be the biggest purchase of a Japanese company by an overseas firm.
All eyes will be on how Seven & i boss Ryuichi Isaka responds. Since 2021, he has been tussling with ValueAct Capital, which successfully pushed for a separation of the CEO and chair role. The U.S. activist sought a spinoff of the convenience store unit but it eventually supported the company's April decision to consider an initial public offering of its superstore business.
Though Isaka and ValueAct appear to be on the same page, the stock has underperformed. Total returns over the past two years was a dismal negative 1%, versus the positive 42% at the Topix Index .TOPX. Even after the latest rally, the stock trades on around 8 times forecast 2025 EBTIDA, well below 13 times at domestic rival Pan Pacific 7532.T and the 12 times at a basket of global peers including Couche-Tard and Walmart WMT.N.
There's more at stake for Tokyo than there was for Paris. Japan is locked in a more-decade-long push to drive shareholder value as part of an effort to revive growth in the $4 trillion economy. Policymakers have cracked down on some crude M&A defence tactics, and Seven & i has already promised a special committee will weigh up Couche-Tard's proposal against the company's other options.
Yet a sale process, if initiated, may not favour an outsider. That was the case for Toshiba where foreign investors who fought for years to shake up the stodgy conglomerate ceded last year to local owners. How warmly Seven & i strings its suitor along will set a new tone for mega-deals in Japan.
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CONTEXT NEWS
Seven & i confirmed on Aug 19 that it had received a confidential, non-binding and preliminary proposal from Canada'sAlimentation Couche-Tard to acquire all outstanding shares of the company.
The Japanese company said its board of directors has formed a special committee to review the proposal, the company's stand-alone plans and other alternatives, following which a response will be made to the Canadian firm.
Seven & i's shares closed up 22.7% to 2,161 yen on the same day, giving the company a market capitalisation of roughly 5.6 trillion yen ($38 billion).
Seven & i shares surge on Couche-Tard’s offer https://reut.rs/3Arz333
Editing by Robyn Mak, Aditya Srivastav and Streisand Neto
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