Seven & i Holdings Rejects Couche-Tard's $39B Proposal

In response to the initial mid-August proposal, the Seven & i board formed a special committee composed solely of independent outside directors to review the takeover bid. The special committee then conducted a "careful and comprehensive" review over the course of multiple meetings with the assistance of financial and legal advisors, according to Stephen Hayes Dacus, chairman of Seven & i's board of directors and chair of the special committee.

"I want to emphasize that the Seven & i Board is single-mindedly focused on delivering value for Seven & i shareholders and other stakeholders. We are open to sincerely consider any proposal that is in the best interests of Seven & i shareholders and other stakeholders," Dacus wrote in the letter. "However, we will resist any proposal that deprives our shareholders of the company's intrinsic value or that fails to specifically address very real regulatory concerns."

Although the board concluded that the proposal is not in the best interest of shareholders and voted unanimously to reject the proposal, based on the also unanimous recommendation of the special committee, the company said it is open to engaging in sincere discussions should it receive a proposal that fully recognizes Seven & i's standalone intrinsic value and addresses its concerns regarding the certainty of closing a deal in the current regulatory environment.

However, Dacus listed three key reasons that the board does not believe the current proposal provides a basis for substantive discussions.

"First, the special committee believes that your proposal is opportunistically timed and grossly undervalues our standalone path and the additional actionable avenues we see to realize and unlock shareholder value in the near- to medium-term," he wrote. "The Seven & i business is a unique asset and strategically positioned within the global convenience store sector. The board is confident that it can realize and unlock shareholder value through a number of strategic actions, including but not limited to our U.S. business, that we are actively pursuing."

The board also believes that even if Couche-Tard were to very significantly improve the proposal's value element, it does not adequately acknowledge the multiple and significant challenges such a deal would face from U.S. competition law enforcement agencies.

"Beyond your simple assertion that you do not believe that a combination would unfairly impact the competitive landscape and that you would 'consider' potential divestitures, you have provided no indication at all of your views as to the level of divestitures that would be required or how they would be effected," the letter continued.

"Your proposal also does not indicate, for example, the timeline you believe would be required to clear regulatory hurdles, or whether you would be prepared to take all necessary action to obtain regulatory clearance, including by litigating with the government."

Finally, the letter noted that while Couche-Tard acknowledged the crucial role that Seven & i plays in everyday life in Japan across multiple sectors, including food retail, banking and other services, this area would require further discussion if the companies reached that point.

Seven & i shared its response in the interest of transparency with shareholders and other stakeholders, as the facts of Couche-Tard's proposal are already in the public domain, Dacus concluded.

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.