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((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
(Added Couche-Tard confirmation in paragraphs 1 and 7, context in paragraphs 2-3 and chart) by Makiko Yamazaki, Kane Wu and Anton Bridge
Canadian company Alimentation Couche-Tard ATD.TO has surveyed Japanese company Seven & i
3382.T about a potential takeover, the two companies said Monday, making the 7-Eleven owner Japan’s biggest takeover target by a foreign company.
Although the value of the offering was not disclosed, it is the latest example of growing interest in Japanese companies from Western investors, drawn by the country’s efforts to improve governance.
It also shines a spotlight on a chain of stores that, though founded in the United States, has become something of a cultural force under its Japanese parent company. Unlike some American convenience stores, Japanese “konbini” are more akin to small supermarkets, selling everything from fresh produce to toiletries to clothing.
News of the deal sent Seven & i shares soaring nearly 23% in Tokyo, valuing the retailer at about 5.6 trillion yen ($38 billion). Couche-Tard, which operates Circle-K convenience stores, is valued at about $58 billion.
For an interactive version of this chart https://reut.rs/3yGe8sL
Seven & i said Couche-Tard has offered to purchase all of the company’s outstanding shares. Alimentation Couche-Tard confirmed that a “friendly proposal” had been sent to Seven & i, adding that it was working to reach a mutually acceptable transaction.
Seven & i employs some 77,000 people worldwide, according to LSEG data, and most of its sales come from its convenience stores abroad. Geographically, the company is primarily American, with North America accounting for three-quarters of its revenue.
The Japanese giant has formed a special committee to review the proposal, it said in a statement, adding that no decision had been made by the committee or its board. The offer was first reported by Japanese business daily Nikkei.
A source told Reuters that discussions were “at a very early stage”.
A deal for the entire company would be the largest takeover of a Japanese company by a foreign firm, according to LSEG data, surpassing the $18 billion deal in 2018 for Toshiba’s memory chip business by a consortium led by private equity firm Bain.
7-Eleven has been working to strengthen its flagship global convenience store chain as part of a broader restructuring that has seen it sell some underperforming assets following pressure from shareholder ValueAct Capital over its asset allocation.
Since last year, the group has announced the closure of dozens of Ito-Yokado supermarkets, withdrawn from the clothing business and completed the sale of its Sogo & Seibu department store unit.
However, Couche-Tard should not have an easy task in concluding an agreement.
“I highly doubt this takeover proposal will go through, especially considering Seven & i’s resistance to divesting even its legacy businesses,” said Oshadhi Kumarasiri, an analyst at LightStream Research who covers Seven & i and writes on Smartkarma.
“Unless the offer comes at a substantial premium to Seven & i’s recent highs, it seems unlikely that management would even consider this idea.”
JAPAN IN FOCUS
For investors, however, the offer highlights the growing appeal of Japanese assets, which have long been shunned.
Changes in corporate governance have helped underscore the renewed interest in Japan and Japanese companies, according to Duncan Clark, chairman and founder of investment advisory firm BDA.
Last year, Japan was home to one of the world’s best-performing stock markets, and this year the Nikkei index hit a series of records as investors cheered governance reform.
“This is another example of the attractiveness of the Japanese market to foreign buyers,” said Manoj Jain, co-founder and co-director of Hong Kong-based Maso Capital.
“Coupled with interest from private equity funds, this trend is expected to continue due to the value of the underlying assets, the potential for efficiency gains and the cost of financing,” Jain added.
Founded in 1980, Couche-Tard has grown from a single store in Quebec to a global network of convenience stores and gas stations, primarily through acquisitions.
The deal, if completed, would follow Couche-Tard’s purchase of some European gas stations from TotalEnergies TTEF.PA for $3.3 billion last year and a $20 billion bid for Europe’s largest food retailer, Carrefour, that was rejected in 2021 by the French government over food safety concerns.
In 2020, Seven & i and Couche-Tard were rival bidders to take over U.S. gas station chain Speedway, which the Japanese company eventually bought for $21 billion.
($1 = 146.2200 yen)
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