Seven & i shares end lower on regulatory concerns over Couche-Tard bid
Adds Couche-Tard shares in paragraph 4
By Ananya Mariam Rajesh and Juveria Tabassum
TOKYO, Aug 20 (Reuters) -Shares in Japan's Seven & i 3382.T, the owner of 7-Eleven, closed nearly 11% lower on Tuesday as investors weighed up regulatory hurdles to a takeover bid from Canada's Alimentation Couche-Tard ATD.TO to create a convenience store giant with almost a fifth of the U.S. market.
While the value of the preliminary proposal by Circle-K owner Couche-Tard has not been disclosed, it would make the 7-Eleven parent the largest-ever Japanese target of a foreign buyout.
The news of the deal sent Seven's shares surging by almost 23% in Tokyo on Monday, valuing the retailer at around 5.6 trillion yen ($38 billion).
Couche-Tard's shares were marginally up in early trading on the Toronto Stock Exchange. The stock fell a little over 2% on Monday, valuing the company at $58 billion.
The deal would allow Couche-Tard to boost its global reach and improve economies of scale. Yet it would almost certainly attract regulatory scrutiny in the U.S., analysts said, where grocery chain Kroger's KR.N proposed $25 billion merger with smaller rival Albertsons ACI.N, announced in 2022, was halted last month due to an antitrust lawsuit.
"It may face obstacles from the Japanese government as the largest foreign acquisition of a Japanese conglomerate, (and) the Federal Trade Commission in the U.S.," said Michael Ashley Schulman, chief investment officer at Running Point Capital.
If successful, he said, the combined company would be a "formidable force" for negotiating supply contracts and expanding into new markets in Asia and South America.
In 2021, Couche-Tard abandoned its $20 billion bid for Europeanretailer Carrefour SA after the takeover plan ran into stiff opposition from the French government.
"We're unsure the (Japanese) government would part with a national food retail champion (France did not). In the U.S., look no further than Kroger and Albertsons. Fuel is politically sensitive, and overlap looks relatively high," Wells Fargo's Anthony Bonadio said.
7-Eleven is the biggest operator in the U.S. convenience retail store space with a 14.5% share of the market in 2023 and Couche-Tard's banners had a 4.6% market share, according to analytics and consulting firm GlobalData. Combining the two would create the industry leader by a considerable margin.
"It seems like it's financially compelling. Seven & i is undervalued and getting the industry leader at a multiple lower than your own, and having synergies and taking out your main competitor is compelling," said a source familiar with the two companies' reasoning.
Still, sealing the deal seemed a bit of a stretch, the source said.
"I don't really know how Couche-Tard can think this deal will get an FTC approval and if it does how it won't be like a Kroger/Albertsons process that was long and super painful and expensive."
Several analysts also saiddivestitures would be required to complete the deal.
RELUCTANCE
The 7-Eleven operator has been on a drive to bolster its flagship convenience store chain globally, part of a larger restructuring that has seen it sell off some lower-performing assets in the wake of pressure from shareholder ValueAct Capital about its asset allocation.
"Couche-Tard can greatly increase the margin and profitability of the existing Seven & i Speedway and 7-Eleven locations," said Cole Smead, CEO of Smead Capital Management, which owns shares in the Canadian firm, adding "they have a history of buying assets and improving the margin in the overall business."
But others cautioned that Seven & i may be reluctant to engage with Couche-Tard in light of its years-long fight with ValueAct that began in 2021.
The San Francisco-based hedge fund had urged the company to consider spinning off its 7-Eleven chain, which was rejected by the Japanese firm. ValueAct also pushed to replace four Seven & i directors last year but lost the campaign.
ValueAct declined to comment on the proposal.
"I think Seven & i won't engage and then some activist... will agitate and try to force them to take the offer seriously," said the source familiar with the two convenience store owners.
Morningstar analysts said the takeover price should be at least equal to their fair value estimate of 2,300 yen per share to be successful, or a 19% premium to Tuesday's closing price of 1,933 yen.
Ratings agency S&P said Seven & i's creditworthiness would come under pressure following a takeover offer, whether or not the deal goes ahead.
"Even if Seven & i does not accept the proposal, it will likely face renewed calls to invest in growth, improve capital efficiency, and return profits to shareholders," S&P said.
Seven & i said on Monday it has set up a committee composed only of independent directors to review Couche-Tard's proposal which includes buying all of the company's outstanding shares.
The Canadian company confirmed a "friendly proposal" was sent to Seven & i, adding it was focused on reaching a mutually agreeable transaction.
($1 = 146.2800 yen)
ANALYSIS-Potential Seven & i blockbuster deal highlights fresh era for Japan M&A L4N3K7073
Reporting by Mariko Katsumura and Kiyoshi Takenaka in Tokyo, Ananya Mariam Rajesh and Juveria Tabassum in Bengaluru, Siddharth Cavale and Abigail Summerville in New York, Kane Wu in Hong Kong; Writing by Miyoung Kim; Editing by David Dolan, Stephen Coates, Edwina Gibbs and Shreya Biswas
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دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔
