[TOKYO] Canadian convenience store and gas station operator Alimentation Couche-Tard Inc. said it could increase its offer to acquire long-time rival Seven & i Holdings but only if the latter engages in takeover talks.
“We may be able to enhance our proposal through due diligence access to financials,” Couche-Tard’s founder and chairman Alain Bouchard said at a press conference in Tokyo on Thursday.
He was joined by chief executive officer Alex Miller and chief financial officer Filipe Da Silva in Japan’s capital to promote their multi-billion dollar bid to purchase the parent company of the 7-Eleven stores – an unusual move for the retailer.
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 US$18.19 per share and exchange rate at the time, the Canadian company is offering to buy Seven & i for 7.39 trillion yen (S$66.6 billion).
But Bouchard expressed disappointment at the lack of engagement with Seven & i’s so far. “We have tried to have meetings. It’s hard. Actually, it’s not possible,” he said.
Couche-Tard is on a publicity blitz as it steps up what company executives call a “friendly” pursuit of Seven & i.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
It launched a new website to make clear to Japanese and stakeholders that a hostile takeover isn’t under consideration. “We remain confident that our proposal is the most attractive for Seven & i, its customers, franchisees, and the shareholders of both companies,” it said.
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 US$5.4 billion, a share buyback programme worth 2 trillion yen and a listing of its US business.
But success has been mixed so far, with Seven & i’s shares still trading more than 20 per cent 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.
“We believe there’s a true path for regulatory approvals in the US,” CEO Miller said during the press conference.
Globally, a combination would create a retail giant with more than 100,000 stores earning over US$150 billion in revenue.
Goldman Sachs Group, Royal Bank of Canada and Scotiabank have provided letters in support of the financing for a deal, according to Couche-Tard. There will be no financing conditions, CFO Da Silva said on Thursday.
Executives also stressed that Couche-Tard has no plans to close stores or cut jobs in Japan.
Shareholder attack
Couche-Tard depends heavily on Seven & i shareholders to push the board to consider its proposal. Artisan Partners Asset Management, which has a nearly 1 per cent stake in Seven & i, called on investors on 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. BLOOMBERG
