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The Japanese operator of 7-Eleven, the world’s biggest convenience store chain, has received a takeover approach from the Canadian retailer Alimentation Couche-Tard, which controls the Circle K brand.
Couche-Tard’s approach to Seven & i Holdings follows more than a year of on-off talks between the two retailers and is the biggest foreign-led takeover attempt to target a Japanese company.
Seven & i’s shares rose 22 per cent on Monday, pushing the market capitalisation of the company to $38bn.
In a statement, Seven & i said it had set up a special committee of non-executive board directors to examine the proposal from Couche-Tard, which seeks to acquire all its outstanding shares.
The Quebec-based retail group later confirmed it “recently submitted a friendly, non-binding proposal” to the Japanese company. It was seeking “a mutually agreeable transaction that benefits both companies’ customers, employees, franchisees and shareholders”, Couche-Tard added.
The approach is the first to fully exploit recent changes in M&A guidelines to make it harder for Japanese company managements to ignore unsolicited or unwanted offers.
According to multiple people familiar with the matter, Seven & i has for some months been working with banking advisers including Morgan Stanley to fortify itself against what it saw as the rising threat of a foreign-led acquisition.
Couche-Tard had been circling Seven & i for several years, making on-and-off contact with the Japanese company within the past two years in an attempt to open friendly deal discussions, said the same people.
The move from Couche-Tard, said banking sources, could also draw in other bidders for the company, including private equity groups that have long coveted the US network of 7-Eleven stores. News of the bid was first reported by the Nikkei.
Seven & i’s preparations for a potential takeover follow a pivotal revision last year of Japan’s merger and acquisition guidelines. The new wording strongly encourages companies to seriously consider any “bona fide” offers at the board level, ending decades during which powerful chief executives could unilaterally reject bids against the interests of shareholders.
The change, say M&A bankers and lawyers, clears the way for foreign buyers to make more unsolicited bids for Japanese companies.
Seven & i has recently overhauled its board and attitude to corporate governance, they said, under pressure both from activist investor ValueAct, which made its stake in the group public in 2021, and Japan’s wider push to reform how companies engage with shareholders. The group’s founder Masatoshi Ito, a top shareholder, died last year.
Couche-Tard has engaged Goldman Sachs as its banking adviser. Morgan Stanley and Goldman declined to comment.
If a deal with the Canadian group is completed, it could face significant competition hurdles. Following its acquisition of US petrol station group Speedway in 2021, 7-Eleven owns more than 13,000 stores in the US and Canada, while Couche-Tard has almost 9,000. ValueAct has pushed for a spin-off of the 7-Eleven chain.
In response to the pressure for reform, Seven & i has also expanded internationally and shed less-profitable businesses. It sold its Sogo & Seibu department store to Fortress Group last year.
Couche-Tard has been on the hunt for global acquisitions. The group has completed multiple takeovers during the past decade in the fragmented convenience store sector.
On Monday, it separately said it had agreed to buy about 270 convenience stores and fuel stations across the US states of Indiana, Pennsylvania, Ohio, West Virginia and Maryland from supermarket chain Giant Eagle.
In 2021, Couche-Tard tried and failed to buy France’s Carrefour supermarket chain for €16.2bn. It also bid for Speedway, which was eventually acquired by Seven & i for $21bn.