Changes ahead: A woman walks out of a 7-Eleven store in central Tokyo. The Japanese owner of 7-Eleven is considering going private by buying back its own shares in a bid to avoid a takeover attempt by Canadian rival Alimentation Couche-Tard. — AFP
TOKYO: Seven & i Holdings Co is considering a management buyout to take itself private with funding from banks, Itochu Corp and the founding Ito family, in a transaction that could be worth around nine trillion yen (US$58bil), people with knowledge of the matter say.
The deal could be presented as an option for shareholders in the event that Alimentation Couche-Tard Inc becomes more aggressive with its pursuit of Seven & i and makes a tender offer, the people said, asking not to be identified because the negotiations haven’t been made public.
The operator of 7-Eleven stores hasn’t said anything publicly since Couche-Tard increased its proposed price for Seven & i to US$18.19 a share last month to value the Japanese retailer at 7.2 trillion yen.
Seven & i had rebuffed an earlier, lower offer by the Canadian operator of Circle K stores and embarked on a restructuring aimed at unlocking value.
A deal with Couche-Tard would be the biggest-ever foreign takeover of a Japanese company.
Under the management buyout being discussed, which would also be the largest-ever in Japan, trading house Itochu, the founding family and existing investors would contribute three trillion yen in cash and equity, the people said.
Japan’s top megabanks – Sumitomo Mitsui Financial Group Inc, Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc – would put up six trillion yen in financing, they said.
Talks are ongoing and the deal could be difficult given its size, the people said. There’s a chance that the management buyout may not proceed if Couche-Tard rescinds its proposal to buy Seven & i, they added.
A representative for Seven & i wasn’t immediately available to comment.
Representatives for Sumitomo Mitsui, Mitsubishi and Mizuho declined to comment on any specific transactions.
A spokesperson for Itochu declined to comment, saying nothing has been decided.
Seven & i shares were suspended following the news of the potential deal. Itochu shares fell as much as 3.4% in early trading in Tokyo.
A management buyout would be a remarkable unified response to Couche-Tard’s takeover approach, which itself is the biggest-ever foreign attempt to buy a Japanese target.
With the participation of Seven & i’s biggest competitor in the domestic convenience store business – Itochu – it would reflect the coordinated resistance of corporate Japan to foreign control of one of its most famous companies.
On the other hand, a foreign takeover would be a watershed moment for corporate Japan, in a country that has long been resistant to large cross-border deals.
Although Seven & i laid out plans to effectively split the company, the management buyout would initially seek to acquire the entire business, one person said.
Following a deal, the new owners would eventually implement the plan to separate the business focused on 7-Eleven, convenience stores and petrol stations from the other, which is made up of less profitable retail operations, the person said.
Itochu, on of Japan’s top trading companies, runs FamilyMart, a rival to 7-Eleven stores, and any deal may seek to deliver synergies between the two convenience store chains.
The heirs of Masatoshi Ito, who expanded a small family-owned shop into one of Japan’s largest retailers and turned 7-Eleven into a global enterprise, together own about 8.5% of Seven & i. His son Junro Ito is a vice-president and board member, and holds part of that stake.
The retailer traces its origins back to the Yokado Clothing Store, founded in Tokyo in 1920. — Bloomberg
