A pedestrian walks past Japan's Seven & I’s 7-Eleven convenience store in Tokyo, Japan, August 19, 2024.Kim Kyung-Hoon/Reuters
Alimentation Couche-Tard Inc. ATD-T is vowing to pursue retailer Seven & i Holdings SVNDY for as long as it takes, as the Canadian convenience store giant tries to lay the groundwork for what would be the largest takeover of a Japanese company by a foreign-based enterprise.
Couche-Tard chief executive officer Alex Miller is in Tokyo this week on a multiday trip with founder and chair Alain Bouchard, chief financial officer Filipe Da Silva, and special adviser Brian Hannasch. They’re meeting with various Seven & i stakeholders in a bid to forge relationships and build some comfort around the idea that, although Couche-Tard’s senior leaders are keen on a takeover, they have deep respect for the Japanese company and have no intention of destroying its culture.
“We’re not going away,” Mr. Miller told The Globe and Mail on Thursday night, adding, “We see tremendous value here and we are just going to continue to highlight that and to push … we’ll get this deal.”
Seven & i controls the 7-Eleven chain’s 85,000 stores around the world as well as a series of other assets including a bank, life insurance units and credit card businesses. The approach by Couche-Tard, based in Laval, Que., is seen as a test of whether Japan is ready for big cross-border mergers, or whether the country will slip back into the protectionist tendencies that have characterized its corporate and political classes over time.
“We think there’s genuine interest, there’s sincerity, in Japan around entertaining foreign investment and wanting foreign investment,” Mr. Miller said.
Couche-Tard will be “patient but persistent” in its pursuit of Seven & i and winning government support for a transaction, Mr. Bouchard said in an interview.
Couche-Tard is interested in Seven & i to bolster its fresh food offerings and logistics, company executives said. More broadly, though, the two companies would be a great fit in an industry that remains highly fragmented, particularly in North America, and badly needs a retailer of this scale, Mr. Bouchard said.
He has already been rebuffed in the past in trying to explore a tie-up between the two companies, and he doesn’t want to fall short again. Mr. Bouchard first broached a merger in 2005, during a meeting with Masatoshi Ito, the now-deceased entrepreneur credited with making 7-Eleven a global brand, but was turned down. Couche-Tard then made an offer for the group in 2020 before the effort was abandoned because of the COVID-19 pandemic.
Now it’s trying again, sweetening an initial offer made public in August to US$18.19 a share, or about US$47-billion, a source told The Globe last week. The Globe is not naming the person because they were not authorized to provide that information. Seven & i’s shares are currently trading below that bid price of about 2,714 yen, signalling that investors remain skeptical that a deal will get done.
In Japan, Couche-Tard executives said they met with bank officials, Seven & i shareholders and other stakeholders.
“We had some great conversations,” Mr. Miller said. “It was important for us to be here and for Japan to see that, ‘Hey we are real, we are genuine about our interest’ and give them a chance to talk to us.”
Couche-Tard has spoken by phone to Seven & i chair Stephen Dacus, who leads a special committee examining the offer. But they were unable to secure a meeting this week with Seven & i president Ryuichi Isaka and his team: “We missed the big one,” Mr. Hannasch said.
Mr. Bouchard told the Financial Times, one of a handful of media outlets that Couche-Tard met with in Tokyo, that the Ito family, which founded Seven & i, and Japanese government officials had also so far refused to meet. But he expressed optimism that that will happen in the weeks ahead.
The Japanese company has said it is open to engaging in talks if Couche-Tard puts forward an offer that recognizes its intrinsic value and addresses regulatory concerns. But it also appears to be engineering its defences in a bid to rally shareholders.
Seven & i announced a restructuring plan last week to refocus on its core business of more than 80,000 convenience stores. The plan involves spinning off 31 of the company’s other businesses – which range widely from supermarkets to a baby-goods store chain – into a new company in 2025 called York Holdings.
Some investors, such as Artisan Partners International, say the Seven & i breakup plan is too little, too late.
“The price currently being offered by Alimentation Couche-Tard is clearly superior to the speculative value that could potentially be achieved by implementing the restructuring plan at this late date,” Artisan Partners wrote in a letter Wednesday to the Japanese company.
Seven & i has suffered from underperformance for years, and investors have long complained that the board has been slow to address the challenges. Couche-Tard offers shareholders a better option, Mr. Hannasch told the Financial Times.
“Our offer is a certainty, right? It’s cash, versus a hope that [Seven & i] can continue to execute on a plan that’s not delivered value over the last years,” he said.
Mr. Bouchard told Bloomberg that his team has “an answer” for possible roadblocks Couche-Tard would face from the U.S. Federal Trade Commission in combining Circle-K and 7-Eleven in that country, and that they’ve already held preliminary talks with regulators.
Meanwhile, Mr. Da Silva said Couche-Tard already has a Japanese bank in its lending syndicate and that it’s “very confident” that it will be able to line up backers to help fund a transaction while keeping a high investment credit rating.
In February, Couche-Tard raised $4.4-billion by selling bonds with assistance from one of Japan’s largest banks, Mitsubishi UFJ Financial Group. The Canadian retailer also used Toyoko-based investment bank SMBC Nikko to sell the debt offering.
A spokesperson for Seven & i declined to offer a detailed response to the Couche-Tard comments Thursday, saying the Japanese company will continue to keep any discussions private.
Mr. Miller said Couche-Tard would not hesitate to abandon the takeover effort if it’s forced to overpay.
“We do not destroy shareholder value,” he told Bloomberg. “If we reached a point that we thought that it was destroying shareholder value, we would walk away.
“Outside of that, we’re going to engage. Our intent is to do what it takes to ultimately realize this transaction.”
With files from Andrew Willis