Japan’s Seven & i Holdings is weighing a takeover offer from a member of its founding Ito family, a white-knight bid that could thwart efforts by Canada’s Alimentation Couche-Tard Inc. to buy the 7-Eleven chain.
A special committee of Seven & i directors is reviewing options including Couche-Tard’s offer as well as a non-binding and confidential proposal received from Junro Ito, a Seven & i vice-president and director, the Japanese company said in a statement Wednesday. Mr. Ito’s family founded Seven & i.
“We are committed to an objective review of all alternatives before us,” Stephen Dacus, chair of the special committee, said in a statement. He said directors will ”continue to engage with all parties” in a bid to maximize value and that no decision has been made to pursue a transaction.
Mr. Ito’s offer, which he’s making with an affiliate called Ito-Kogyo, would be a management buyout to take the company private, according to Japanese media. Taking that route would eliminate pressure on the company from shareholders pushing for asset sales. It could also become a preferred option if Couche-Tard goes hostile with its offer.
Mr. Ito is working with trading conglomerate Itochu on the offer and has the support of three of Japan’s top megabanks for a bid worth around 9 trillion yen (or US$58-billion), Bloomberg reported. Seven & i did not confirm the value of the bid and did not provide any other specifics in its statement.
Couche-Tard is currently offering US$47-billion or US$18.19 a share. The Ito group’s offer would be worth about US$22 a share, just over 20 per cent higher than Couche-Tard’s offer, according to Bank of Montreal analyst Tamy Chen.
“If there is a management buyout being contemplated at that value, it appears to be a superior offer than Couche-Tard’s,” Ms. Chen said in a note. There may be limited room for the company to increase its bid, especially if it isn’t given full access to perform due diligence, she said.
Couche-Tard representatives were not immediately available for comment.
At US$58-billion, a deal would be the largest management buyout in history. The biggest so far is the US$32.9-billion paid for U.S. hospital company HCA in 2006 when its founder teamed up with private equity heavyweights KKR & Co and Bain Capital.
Seven & i controls the 7-Eleven chain’s 85,000 stores around the world as well as a series of other assets including a bank, life insurance units and credit card businesses. The company has suffered from underperformance for years, and investors have long complained that the board has been slow to address the challenges.
In response, Seven & i has been trying to convince investors that it can deliver long-term growth on its own. Under a restructuring announced last month, it aims to split off its supermarket operation and some 30 other “non-core” units into a holding company.
Couche-Tard offers shareholders a better option, executives with the Canadian company have said. “Our offer is a certainty, right? It’s cash, versus a hope that [Seven & i] can continue to execute on a plan that’s not delivered value over the last years,” Brian Hannasch, a special adviser with the company, told the Financial Times.
Ito-Kogyo owned 8.2 per cent of Seven & i as of August, making it the second-largest shareholder, according to a regulatory filing. Mr. Ito, as an executive and director, has been excluded from all discussions within the company relating to any takeover proposal received, Mr. Dacus said in the Wednesday statement.
In an interview with The Globe and Mail last month, Couche-Tard executives vowed to pursue Seven & i Holdings for as long as it takes.
“We’re not going away,” Couche-Tard CEO Alex Miller said. “We see tremendous value here and we are just going to continue to highlight that and to push … we’ll get this deal.”