Alimentation Couche-Tard Makes Case for Seven & i Deal
LAVAL, Quebec, & TOKYO — Alimentation Couche-Tard Inc.'s (ACT) proposed acquisition of Seven & i Holdings Co. Ltd. may not yet be dead in the water following the Sept. 6 rejection by Seven & i's board of directors. Two days later, Couche-Tard made a case for the deal in a letter sent to the board and shared publicly.
"Couche-Tard has deep respect for Seven & i and the business it has built in Japan and around the world, including its operating model, franchisee network and brand. We continue to have strong conviction that a combination with Seven & i has clear strategic and financial benefits for both companies' customers, employees, franchisees and shareholders," the company wrote. "We believe that, working together, we can successfully reach and complete a mutually agreeable transaction."
The company expressed its disappointment in the rejection by 7-Eleven Inc.'s parent company and noted that it had been willing to enter into a nondisclosure agreement (NDA) to allow both companies to share information to find more value, and cited multiple factors to support its believe that Couche-Tard and Seven & i could "achieve significantly more together than we could individually."
[Read more: What Would a Couche-Tard & 7-Eleven Tie Up Mean for the Industry?]
In the letter, Couche-Tard pushed back against the Seven & i board's concern regarding U.S. antitrust regulations that could jeopardize such a deal, stating that it had a successful track record of acquisitions and working with regulators in full compliance with applicable processes and requirements. It also cited the highly fragmented convenience store market in the United States, and expressed its belief that the companies could "meet any regulatory needs while securing the well-established ecosystem [Seven & i] has successfully created in Japan."
Couche-Tard also highlighted its strong history of generating strong shareholder return, including more than 450% in the last 10 years, while emphasizing that it always take a humble approach when entering new markets. This includes always maintaining and learning from local leadership and employees, and empowering local leaders and operators with resources to enable them to keep serving their customers and communities, the company said.
"We also acknowledge that Seven & i plays an important role in Japan's emergency response and serves as a part of the community lifeline and social infrastructure," Couche-Tard wrote. "We are committed to Seven & i continuing to serve in this capacity. Couche-Tard also has deep experience supporting our communities during crisis, including during pandemics, hurricanes, fires, floods and other devastating natural disasters. Similar to Seven & i, we stay open, provide essentials and are important to emergency responses in our communities."
On the financial side, Couche-Tard reiterated its confidence that it has sufficient capacity to finance the deal in cash, adding that it has well-established relationships with major financial institutions and investors who are willing to support the company in the transaction.
"In summary, we remain highly focused on consummating a transaction with 7&i [Seven & i] that is in the best interests of all constituencies. We stand by prepared to enter into collaborative and friendly discussions with Seven & i to focus on finding greater value for Seven & i and its shareholders, providing regulatory certainty and ensuring that the combined entity continues to be the leader and provider of premier offerings in the markets we both serve," Couche-Tard concluded.
Couche-Tard's full statement is available here.
In response, Seven & i held firm to its previous rejection.
"As our board has previously discussed and stated, we do not believe that the proposal ACT put forward provides a basis for us to engage in substantive discussions regarding a potential transaction," the company said in a released statement. "This is precisely why we have not asked our advisors to engage in further discussions or signed an NDA.
"We remain open to engaging in sincere discussions should ACT put forth a proposal that fully recognizes Seven & i's standalone intrinsic value and addresses the Special Committee's very real regulatory concerns. Unless and until ACT does so, Seven & i will focus on executing its business and pursuing the actionable avenues we see to realize and unlock shareholder value in the near- to medium-term."
7-Eleven Inc. is No. 1 on the 2024 Convenience Store News Top 100 report. Alimentation Couche-Tard is the No. 2 retailer on the ranking.