Canadian convenience store giant Alimentation Couche-Tard has withdrawn its US$47 billion takeover bid for Japan’s Seven and i Holdings, citing a lack of constructive engagement from the Japanese retailer.
The move marks the collapse of what could have been the largest foreign acquisition of a Japanese company, as Couche-Tard, operator of Circle K, sought to create a global convenience store powerhouse by acquiring the company behind 7-Eleven.
“There has been no sincere or constructive engagement from Seven and i that would facilitate the advancement of any proposal, contrary to comments made publicly by its representatives,” Couche-Tard said in a letter to its board of directors. The letter further accused Seven and i of engaging in “a calculated campaign of obfuscation and delay, to the great detriment of the company and its shareholders.”
In response, Seven and i said it was “disappointed” by Couche-Tard’s decision and disagreed with “numerous mischaracterisations,” but added it was “not surprised” by the withdrawal.
The development is seen as a test of Japan’s openness to foreign takeovers, coming shortly after Nippon Steel secured a US$14.9 billion deal to acquire US Steel. Shares in Seven and i were untraded on Wednesday due to an excess of sell orders.
“We are very disappointed in what appears to be a lack of willingness to engage from Seven and i,” said Manoj Jain, co-founder and co-chief investment officer of Hong Kong-based Maso Capital. “We believe there is significant value to be realised in a combination and have expressed this view to the management and the board.”
Couche-Tard had initially offered US$38.5 billion in October last year and raised its bid to US$47 billion. In March, the Canadian group indicated it was willing to increase the offer further if Seven and i provided greater financial transparency. Couche-Tard also worked with the Japanese firm on a store divestiture plan aimed at easing regulatory hurdles.
The approach seemed to gain momentum after the Seven and i founding Ito family’s US$58 billion white-knight bid failed to secure financing. However, Couche-Tard said attempts to engage directly with the family were rebuffed.
Despite a non-disclosure agreement between the companies, Couche-Tard criticised the “negligible” due diligence process, which it claimed was limited to “two tightly constrained management meetings.”
The Canadian firm believed a full merger would have maximised shareholder value but explored alternative proposals, including acquiring all of Seven and i’s international business and 40 per cent of its domestic operations. Convenience stores in Japan are considered critical infrastructure due to their role in supporting communities during natural disasters.
Seven and i reportedly countered with a proposal to sell its international business to Couche-Tard in exchange for a stake in the Canadian company. However, Couche-Tard dismissed the suggestion, arguing it would not deliver the “significant premium” offered in its original proposals.
Under pressure to improve sluggish earnings and prove it can grow independently, Seven and i has announced a share buyback, divested non-core assets, and plans to list its North American convenience store operations.
“We remain fully committed to our standalone value creation plan, which we have been pursuing in parallel,” Seven and i said.
-Reuters
