Seven & I expressed disappointment at Couche-Tard’s decision to withdraw from the deal, but also disagreed with the falsehoods mentioned in the letter from the Canadian company.
Canada’s Alimentation Couche-Tard has withdrawn its ¥6.77 trillion ($45.8 billion) offer to buy Seven & I Holdings Co., saying that the Japanese operator of 7-Eleven convenience stores has declined to have meaningful participation after nearly a year of pursuit.
The unexpected move ended what may have been the biggest foreign takeover of a Japanese company. Couche-Tard, the operator of Circle K, sought to acquire the company that owned 7-Eleven to create an international convenience store giant.
Couche-Tard wrote a letter to Seven & i’s board, stating that there was no sincere or constructive engagement from the company to advance the proposal.
The stock of Seven & I fell as much as 9.6% during the early trading session in Tokyo. The Japanese retailer has made significant changes, including hiring Stephen Dacus as chief executive (CEO), making a deal to sell its superstore division for $5.4 billion, and offering a 2 trillion share buyback and listing its US business.
Seven & I expressed disappointment at Couche-Tard’s decision to withdraw from the deal, but also disagreed with the falsehoods mentioned in the letter from the Canadian company.
The Japanese company added that it will remain fully committed to its standalone value generation plan and improve key areas of its business operations.
The abandonment of the offer, which would have been the largest foreign takeover of a Japanese company in history, shows a setback in increased corporate transparency, where executives have long been able to show greater indifference to shareholder demands for higher valuation.
Before the plan to acquire Seven & I became public, analysts viewed it as bold and unlikely for a well-known Japanese company. Given that the government had protectionist tendencies, company boards preferred stability over shareholder return. Despite changes made to company guidelines to give Japan more government and investor protections, that opinion might remain in place for a while.
Couche-Tard is the company that runs Circle K stores globally. It revealed that it has proposed alternative options for a merger, including buying Seven & I’s overseas business and taking a small share of the Japanese company.
In March, Bouchard, who co-founded Couche-Tard stated that they have improved the possibility of a takeover offer through better access to financial data. Since then, two companies have signed a non-disclosure agreement to share information, but Couche-Tard stated that that level of involvement was not enough.
According to Couche-Tard, they had a meeting with management, which was tightly scripted or only partially disclosed. Most of the material Seven & I showed was either already publicly available or very limited. The company stated that it did not address any of its critical questions.
Seven & I raised concerns about possible opposition from United States antitrust regulators to any merger agreement with Couche-Tard. The two parties decided earlier this year to find potential buyers for 2,000 convenience outlets in North America to address the risk.
Many parties showed interest in acquiring the stores, but Couche-Tard claimed that Seven & I did not share the necessary information with potential buyers.
Analyst Lea El-Hage stated that there will be more pressure on Seven & I’s management to deliver after Couche-Tard’s exit.
El-Hage stated that the company needs to ensure in its August strategy that they are of greater value as a standalone than the rejected offer.
Many people view Seven & I as a test case for Japan’s business culture’s openness to take over a foreign company. The withdrawal came after Nippon Steel successfully took over US Steel in a controversial $14.9 billion deal.