Japan might be a better place for Alimentation Couche-Tard. The owner of Circle-K has submitted a preliminary acquisition offer for Tokyo-listed Seven & i, which runs the 7-Eleven convenience store chain, after the French government's veto of its attempt to acquire Carrefour in 2021 due to concerns over food and security. The target made this announcement on Monday. The Asian nation's fair M&A regulations indicate that, at the very least, the Canadian buyer's most recent approach will be considered.
.
There was no disclosure of financial information, including an offer price. On the other hand, Seven & I's shares surged to their daily high of 23% upon learning of the proposal, valuing the business at a nearly all-time high of $38 billion. The swift response demonstrates how much wealth the market believes is still to be unlocked. Deals at this level could be the largest outside corporate acquisition of a Japanese company.
How Seven & I chief Ryuichi Isaka reacts will be watched closely.He has been at odds with ValueAct Capital since 2021, when the latter successfully campaigned for a division of the CEO and chair role. The American activist finally backed the company's April move to explore an IPO of its superstore business, although initially it wanted a separation of the convenience store segment.
Though ValueAct and Isaka seem to be in agreement, the stock has done poorly. In comparison to the positive 42% at the Topix Index, the overall returns over the last two years have been a pitiful negative 1%. Even after the most recent surge, the stock is trading at about eight times projected 2025 EBITDA, far less than the 13 times at its domestic rival Pan Pacific and the 12 times at a group of international competitors that includes Walmart and Couche-Tard.
Tokyo has more at stake than Paris did. As part of its attempt to spur growth in its $4 trillion economy, Japan has been involved in a more than decade-long push to increase shareholder value.Authorities have taken a hard line against some flimsy M&A defense strategies, and Seven & I has promised to form a special committee to weigh up Couche-Tard's offer against the company's possible other options.
However, once the sale process is started, it might not be favorable to an outsider. In Toshiba's case, this was the situation when international investors, who had battled for years to shake up the staid corporation, gave up control to local owners last year. The way that Seven & I entices its suitor will redefine the standard for mega-deals in Japan.