LAVAL, Quebec — Alimentation Couche-Tard Inc., operator of Circle K stores globally, abandoned its bid for Tokyo-based Seven & I Holdings Co., which derives most of its revenue from its 7-Eleven stores in North America.
“There has been no sincere or constructive engagement from 7&i that would facilitate the advancement of any proposal, contrary to comments made publicly by 7&i representatives,” Couche-Tard said in a letter delivered July 16 to Seven & I’s board. "Rather, you have engaged in a calculated campaign of obfuscation and delay, to the great detriment of 7&i and its shareholders.”
The Canadian company last year made a “friendly, non-binding” proposal to buy Seven & i, a deal that would have been the largest takeover yet of a Japanese company.
Couche-Tard is smaller than Seven & i, with about 16,700 stores in 31 countries and territories. Brands include Circle K, Ingo, and its flagship Couche-Tard, which has about 650 locations in Quebec. By contrast, more than 85,000 stores across 20 countries operate under the 7-Eleven banner. More than 21,000 of the 7-Eleven stores are in Japan.
Seven & I rejected the initial buyout offer of $14.86 a share last August, saying it “grossly undervalues” the company. Couche-Tard reportedly came back in October with an offer of $18.19 per share.
The Japanese company also pointed to potential antitrust hurdles in United States, where 7-Eleven and Circle K are the two largest convenience-store operators. The two companies have a combined 15,000 convenience stores in the United States. Couche-Tard explored selling some stores to help mitigate antitrust concerns.
Couche-Tard’s buyout bid also ran into concerns in Japan about the integral role played by 7-Eleven stores, which in addition to selling snacks and household staples serve as banking and postal hubs, and are vital supply points during natural disasters.
Seven & I this week expressed regret over Couche-Tard’s decision to drop its bid and said it would continue working to bolster its growth prospects. In March, the company appointed Stephen Dacus as the first foreigner to lead the company as chief executive officer. Dacus, a Japanese American who is fluent in Japanese, has prior retail experience at Walmart and Uniqlo.
Dacus outlined a restructuring plan that includes an initial public offering of its U.S. subsidiary by the end of next year, share buybacks, and the sale of its supermarket chain, York Holdings.
Couche-Tard’s letter to Seven & I’s board appeared to leave the door open to future negotiations.
"As we have expressed many times, we do believe that fully combining our two companies is the most straightforward and effective way to maximize value to all stakeholders,” according to the letter, signed by Chairman Alain Bouchard and CEO Alex Miller. "We believe this combination has the ability to enhance that path. However, we are not able to effectively pursue this combination without deeper and genuine further engagement from 7&i leadership and the special committee.”
