By Scott Murdoch and Kane Wu
(Reuters) – Canadian food company Alimentation Couche-Tard said it is willing to engage in confidential talks with Japanese grocery giant Seven & i Holdings over its $38.5 billion takeover proposal, as it remains committed to pursuing a takeover.
Shares in the 7-Eleven store owner Seven and I closed 2.4% higher in Tokyo on Monday at 2,185 yen ($15.26), above the all-cash offer of $14.86 per share the Canadian company rejected on Friday.
Seven & i said on Friday the deal was not beneficial to its shareholders and could face antitrust challenges in the US, where the combined company would be the world's largest supermarket operator by a large margin.
Couche-Tard, which owns the Circle-K brand, said in a statement on Sunday that it will consider the money that may be needed to obtain regulatory approvals in the US and believes it will provide a compelling combination to address all regulatory issues in Japan. .
“Given the mutual benefits of the combination, we are disappointed by 7&i's refusal to engage in friendly negotiations. We are very confident that the joint negotiations can lead to our ability to acquire a growing number of 7&i shareholders,” said Couche-Tard.
Couche-Tard said he hopes to arrange financing for the deal, which would be Japan's largest-ever takeover and the largest corporate offering since Elon Musk's $40.2 billion purchase of Twitter in 2022. , according to the statement. LSEG data.
“We have received a letter from our financial advisor stating that he is very confident that he is able to arrange financing for the proposed project, subject to customary conditions,” the Canadian company said.
The Japanese company in a statement issued on Monday said that Couche-Tard's disdain for it was the reason it could not agree to the consultant's discussions between the companies or sign a non-disclosure agreement.
Seven & I said in a statement that it remains open to “honest discussions” if Couche-Tard makes a proposal fully aware of its independent value and addresses the legal concerns raised by its special committee set up to review the deal.
FUTURE GROWTH
Investor Artisan Partners (NYSE: ), said on Aug. 30 owns more than 1% of Seven & i, said that by rejecting the bid the burden was now on the Japanese company to determine how it will deliver future growth to investors.
“The three reasons for rejecting an offer – value, regulatory and stakeholder barriers – can all be addressed,” said Artisan joint portfolio manager Ben Herrick.
“More importantly, Seven&i's response starts the clock for its management and board to show how they plan to deliver value beyond what Couche-Tard offers.”
Although Seven & i is much larger than Couche-Tard in terms of sales, stores, and employees, its stock has underperformed for years, prompting complaints from investors including ValueAct Capital about the company's management and asset structure.
“Seven&i is currently undervalued for a variety of reasons related to structure, timing and corporate culture. Its long-term value is much, much higher,” said JapanConsuming founder Michael Causton who publishes in Smartkarma.
“Couche-Tard knows this and the timing of its bid speaks to its skills as a seller. But it will be an uphill battle to get Seven & I at a low price … many investors know its true value.”
The deal, if successful, would allow Couche-Tard, which has a market value of approximately $52 billion, to expand its global reach and develop economies of scale.
“Based on the response from Couche-Tard it would appear that there is an opportunity for a higher offer and this will be required for Seven&i's board to move forward,” said Manoj Jain, founder and chief investment officer at Maso Capital. , a shareholder in Seven & i.
Bloomberg News previously reported on Couche-Tard's plans and said it had not ruled out going directly to shareholders with its bid.
($1 = 143.2200 yen)
