Couche-Tard Rules Out Hostile Takeover on Japan’s Seven & i

Canadian convenience store and gas station operator Alimentation Couche-Tard Inc. said it won’t go hostile in its attempt to acquire long-time rival Seven & i Holdings Co.

Couche-Tard’s top executives are in Tokyo Thursday to promote their multi-billion dollar bid to purchase the parent company of the 7-Eleven stores. Founder and Chairman Alain Bouchard, Chief Executive Officer Alex Miller and Chief Financial Officer Filipe Da Silva are even holding a press conference — something highly unusual for the retailer.

“A hostile takeover is not under consideration,” the company said on a new website seeking to reassure Japanese and stakeholders. “We remain confident that our proposal is the most attractive for Seven & i, its customers, franchisees, and the shareholders of both companies, and so we will continue our friendly approach with Seven & i.”

Earlier this week, the company said it has financing in place and sees a clear path to gaining antitrust regulatory approval in the US. 

Couche-Tard, which owns the Circle K brand, submitted a new, yen-denominated non-binding proposal on Jan. 24. Based on its previously indicated price of $18.19 per share and exchange rate at the time, the Canadian company is offering to buy Seven & i for ¥7.39 trillion .

Ever since Couche-Tard’s approach became public in August, the operator of 7-Eleven stores has sought to make a case for remaining independent. Seven & i last week announced sweeping changes, including board director Stephen Dacus taking over as chief executive officer, the sale of its superstore business for $5.4 billion, a share buyback program worth ¥2 trillion and a listing of its US business.

But success has been mixed so far, with Seven & i’s shares still trading more than 20% below Couche-Tard’s offer.

This week, Seven & i said it presented several steps to address any regulatory hurdles, namely the divestment of more than 2,000 stores, to be agreed upon before any potential deal. Those include finding a buyer for all of Couche-Tard’s Circle K stores in the US. Given that Seven & i and Couche-Tard’s convenience stores are the top two chains in the US, their combined number of more than 20,000 outlets would be 7.6 times bigger than their next competitor, Casey’s General Stores Inc. 

Goldman Sachs Group Inc., Royal Bank of Canada and Scotiabank have provided letters in support of the financing for a deal, according to Couche-Tard. 

Couche-Tard has said it has no plans to close stores or cut jobs in Japan. “We admire 7-Eleven Japan’s products, distribution system, operating model, franchisee network, and brand,” says the website. “As a result, we have no intention to change 7-Eleven Japan’s operations.”

Couche-Tard depends heavily on Seven & i shareholders to push the board to consider its proposal. Artisan Partners Asset Management Inc., which has a nearly 1% stake in Seven & i, called on investors Thursday to express their dissatisfaction with the convenience operator’s leadership.

“Now it is the job of shareholders, the owners of the company, to hold leadership accountable,” the Milwaukee-based investment firm said in a media release. “The hallmarks of current leadership include years of poor operating performance, terrible capital allocation, conflicts of interest, management entrenchment and inadequate consideration of a potentially value-creating acquisition.”

Artisan pointed out to the departure, on March 11, of two independent directors, Jenifer Simms Rogers and Elizabeth Miin Meyerdirk. “The recent resignations of two of the company’s independent directors are a sign of dysfunction and will serve to further compromise the board function,” the asset manager said.

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