Canadian retail giant Alimentation Couche-Tard announced on Sunday its openness to confidential discussions with Japan’s Seven & i Holdings regarding a potential $38.5 billion acquisition, despite the rejection of a previous offer. The company remains determined to pursue a deal.
On Monday, shares of Seven & i, the parent company of 7-Eleven convenience stores, saw a 2.5% rise during early trading in Tokyo, reaching approximately 2,191 yen ($15.35). This surpassed the $14.86 per share all-cash bid from Couche-Tard that was turned down on Friday.
Seven & i rejected the offer, citing concerns that it was not in the best interests of its shareholders. The company also expressed worry about possible antitrust issues in the U.S., where a merger could create the largest convenience store chain.
Couche-Tard, which operates the Circle-K brand, stated it is open to making concessions, including divesting assets, to overcome any regulatory hurdles. The Canadian company believes the merger would create a strategic and beneficial partnership while addressing all compliance concerns in Japan.
“Given the potential synergies, we are disappointed by Seven & i’s decision not to engage in constructive talks. We are confident that further discussions could yield greater value for Seven & i’s shareholders,” Couche-Tard shared in a statement.
The company also indicated it had secured a letter from its financial advisor, ensuring that it could arrange financing for the deal, which would represent the largest foreign acquisition of a Japanese company to date. If completed, the transaction would also be one of the biggest all-cash deals since Elon Musk’s $40.2 billion purchase of Twitter in 2022.
Despite the potential for increased value, Seven & i remains hesitant. On Friday, the company noted that even a “significant” improvement in the offer would not eliminate concerns over whether the acquisition could proceed.
While Seven & i has more significant sales, employees, and stores than Couche-Tard, its stock performance has lagged in recent years. This has led to investor criticism, particularly from ValueAct Capital, which has voiced concerns about the company’s management and organizational structure.
Michael Causton, co-founder of JapanConsuming and contributor on Smartkarma, explained, “Seven & i is undervalued due to various factors, including corporate culture and structure. Its long-term potential is much higher. Couche-Tard recognizes this and is trying to capitalize on the situation, but acquiring the company at a low price may prove difficult as many investors understand its true value.”
If successful, the deal would enable Couche-Tard, which has a market value of roughly $52 billion, to expand its global presence and enhance economies of scale. According to Bloomberg, Couche-Tard has not ruled out taking its proposal directly to Seven & i shareholders.
(Note: $1 = 142.70 yen)
