APOLLO Global Management is considering taking a substantial stake in a bid by Seven & i’s founding Ito family to take the Japanese convenience store operator private, sources familiar with the matter said.
The US private equity giant is discussing a commitment of as much as 1.5 trillion yen (S$13 billion) for an equity stake in the plan, said the sources, who asked not to be identified as the information is not public.
Under the current proposal, which is subject to change, Apollo would join the Ito family and Itochu, the operator of FamilyMarts in Japan, as key investors. The Ito family is weighing a commitment of around 500 billion yen and Itochu of over one trillion yen. Other partners are still negotiating stakes.
The present proposal sees equity stakes making up about four trillion yen, with the rest of the financing coming from the banks, the sources said.
The valuation of the buyout effort was originally planned for nine trillion yen – trumping the 7.5 trillion yen takeover bid from Alimentation Couche-Tard – but may be lowered as the Japanese company’s market value remains well below the proposals, the sources said. Seven & i’s market valuation on Friday (Jan 10) hovered around 6.3 trillion yen after stocks dipped over third quarter earnings.
A representative for Apollo declined to comment.
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Details of the deal, such as the investment structure, the ratio of voting rights and the composition of the board members, are still being negotiated, the sources said.
The management buyout consortium is racing to finalise a proposal ahead of Couche-Tard, whose unsolicited interest in Seven & i set off a frenzy at the staid Japanese retail giant last year. Besides the take-private plan, Seven & i has also announced a radical restructuring to separate its convenience store business from the weaker retail operations, pledging to raise the value of the former.
The Ito family-led bid would be among the biggest buyouts on record, and reflect a successful unified effort by corporate Japan to keep one of the country’s most famous companies from falling into foreign hands.
On Thursday, Seven & i’s chief financial officer Yoshimichi Maruyama said that a special committee of the company’s board is still considering takeover proposals by Couche-Tard and Ito family, although it does not have enough information to evaluate them.
“We are considering all options, and whether they are feasible,” Maruyama said. “Both proposals have hurdles to make an acquisition possible. We have not received details of those solutions, so the ball is on the side of those proposing buyouts.”
Seven & i management will decide what the best course of action will be, with an eye towards the shareholders’ meeting in May, he said. BLOOMBERG
