Japan’s Seven & I Rejects Couche-Tard’s $38.5 Billion Takeover Offer

By Mariko Katsumura, Scott Murdoch, and Kane Wu

TOKYO – Japanese retail powerhouse Seven & i Holdings announced on Friday that it has rejected a cash offer of $38.5 billion from Canada’s Alimentation Couche-Tard, which would have marked the largest foreign acquisition of a Japanese company to date.

The operator of 7-Eleven stated that the takeover bid does not align with the best interests of its shareholders and would likely encounter substantial antitrust hurdles in the United States, where the merged entity would dominate the convenience store market.

Earlier, Seven & i revealed that it had received an offer from Couche-Tard but withheld the exact bid amount. The disclosed amount stood at $14.86 per share. While the company expressed a willingness to consider future proposals seriously, it emphasized that it would resist any bid perceived as undermining the intrinsic value for shareholders or that disregarded regulatory concerns.

In a formal communication addressed to Couche-Tard, Stephen Dacus, chair of the independent committee reviewing the offer, stated, "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."

Couche-Tard has not commented publicly on the rejection. However, incoming CEO Alex Miller expressed confidence during a recent earnings call regarding the company’s ability to finance the deal.

Following the announcement, shares of Seven & i fluctuated before ultimately closing down 1.43% at 2,133.5 yen, slightly higher than the proposed $14.86 per share. This price reflects an increase from the 1,761 yen trading level prior to Couche-Tard’s approach being made public on August 19. Meanwhile, shares of Couche-Tard have dropped roughly 8% since the bid was revealed.

Seven & i cautioned that even if Couche-Tard were to enhance its offer significantly, there would still be concerns about the ability to proceed with the acquisition. The letter from Dacus specified that the current proposal failed to recognize the considerable challenges presented by U.S. competition laws and offered no assurance of a deal’s completion.

At $38.5 billion, Couche-Tard’s bid represents the largest all-cash offer for a company since Elon Musk’s acquisition of Twitter for $40.2 billion in 2022. Prior to this, Mars Inc had made a $35.2 billion bid for Kellanova.

Independent analyst Travis Lundy noted that there may still be potential for Couche-Tard to enhance its offer, suggesting that this initial bid was merely a starting point. Morningstar assessed Seven & i’s fair value estimate at 2,300 yen per share, exceeding the current offer.

Analyst Oshadhi Kumarasiri from LightStream Research assumed that this deal might conclude here, expressing doubt that Couche-Tard would meet a price Seven & i would find fair, especially given Seven & i’s relative size and performance challenges.

Despite the current rejection, Couche-Tard’s interest highlights a broader trend of Western investors seeking opportunities in Japanese companies, spurred by the country’s movements towards improved corporate governance.

A successful acquisition would surpass the previous record for foreign buyouts in Japan, which was the $18 billion purchase of Toshiba’s memory chip division by a private equity-led consortium in 2018.

Analysts anticipate significant regulatory scrutiny in the U.S. should the deal progress, particularly in light of a recent antitrust case that halted a proposed merger between grocery giants Kroger and Albertsons.

Currently, 7-Eleven holds a 14.5% share of the U.S. convenience store market, while Couche-Tard’s brands account for 4.6%, according to GlobalData.

Recent analysis suggested that the combined entity might require divestitures of certain U.S. stores, particularly in the West, Midwest, and Central regions.