Japanese retail giant Seven & i Holdings said today it had turned down Circle-K owner Alimentation Couche-Tard's $38.5 billion cash bid, rejecting an offer that would be the largest-ever foreign buyout of a Japanese company.
7-Eleven operator Seven & i said the takeover proposal was not in the best interest of shareholders and was likely to face significant antitrust challenges in the US, where the combined company would be the convenience store industry's biggest by a considerable margin.
Seven & i, which said last month it had received an offer from Canada's Couche-Tard without naming the price, disclosed the bid was at $14.86 a share and said it was open to "sincerely consider" any proposals.
But it would "resist any proposal that deprives our shareholders of the company's intrinsic value that fails to specifically address very real regulatory concerns," Seven & i said in a letter addressed to Couche-Tard.
"We do not believe, for several critical reasons, that the proposal you have put forward provides a basis for us to engage in substantive discussions regarding a potential transaction," said the letter sent from Stephen Dacus, the chair of the Seven & i special committee of independent directors that was formed to consider the offer.
Couche-Tard's incoming CEO Alex Miller said on a post-earnings call yesterday that Couche-Tard was confident in its ability to finance and complete the deal.
The Japanese company said if Couche-Tard was to increase the value of the offer "very significantly" it would still be concerned over whether a takeover would be able to progress.
"Your proposal does not adequately acknowledge the multiple and significant challenges such a transaction would face from U.S. competition law enforcement agencies in the current regulatory environment and provides no certainty to closing," Dacus said in the letter.
At $38.5 billion, the Couche-Tard bid is the largest all-cash offer for a company since Elon Musk bought Twitter for $40.2 billion in 2022, according to LSEG data. Mars last month bid $35.2 billion for food group Kellanova.
Travis Lundy, an independent analyst, said there still appeared to be room for Couche-Tard to improve its proposal.
"It was an opening salvo," he said. "Everyone knows it wasn't their last and best offer and wasn't going to be fully fleshed out."
Morningstar said today its fair-value estimate for Seven & I was 2,300 yen per share, which sits above the Couche-Tard offer.
"I assume this deal is likely to end here," said Oshadhi Kumarasiri, an analyst at LightStream Research. "While it's possible they could come back with a higher offer, I doubt Couche-Tard will ever be willing to meet a price that Seven & i would consider fair."
While Seven & i is much larger than Couche-Tard in terms of sales, stores, and employees, its shares have underperformed for years, drawing complaints from investors including ValueAct Capital about the company's management and asset structure.
