Circle K Owner Couche-Tard Pursues Talks With 7-11 Operator Seven & I After $38.5B Bid Rejected

Alimentation Couche-Tard Inc ANCTF has approached Seven & i Holdings SVNDY for discussions after its $38.5 billion offer was declined. The Canadian firm remains interested in the acquisition.

What Happened: Seven & i stated that the offer was not in the best interest of its shareholders and could face antitrust issues in the U.S., where the combined entity would become the largest convenience store operator.

Couche-Tard, owner of the Circle-K brand, expressed willingness to make divestitures to gain regulatory approval. The company believes a merger would address all regulatory concerns in Japan.

Couche-Tard emphasized its disappointment at Seven & i’s refusal to engage in discussions, stating, “We are highly confident that collaborative discussions would lead to our ability to find increased value for 7&i shareholders.”

The Canadian company is confident about securing financing for the deal, which would be the largest-ever foreign takeover of a Japanese firm and the biggest all-cash offer since Elon Musk‘s $40.2 billion acquisition of Twitter in 2022, according to LSEG data.

Shares of the Japanese retail giant, which owns 7-Eleven, rose 2.5% in early Tokyo trading on Monday, reaching 2,191 yen ($15.35). This is above the $14.86 per share all-cash proposal that was turned down on Friday.

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Why It Matters: The rejection of Couche-Tard’s offer by Seven & i comes after a series of strategic moves and market reactions. In April, Seven & i considered separating its retail arm, Ito-Yokado, to focus on expanding its 7-Eleven franchise.

Seven & i has been innovating its business model, such as launching a subscription program in January 2022 that waived delivery fees.

JapanConsuming co-founder Michael Causton says, Seven & i is considered undervalued due to factors related to its structure, timing, and corporate culture, with its long-term value being significantly higher. He notes that Couche-Tard recognizes this and has timed its bid strategically, showcasing its expertise in deal-making, according to Reuters report. However, acquiring Seven & i at a lower price may prove challenging, as many investors are aware of the company’s true value.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote