Latest news with #SevenI
Japan Times
2 days ago
- Business
- Japan Times
Seven & I risks becoming buyout target again if turnaround fails
Seven & I Holdings remains a buyout target in the eyes of some investors, who say new suitors may emerge unless the operator of 7-Eleven convenience stores turns around its business after fending off Alimentation Couche-Tard's unsolicited ¥6.77 trillion ($45.8 billion) takeover approach. "If the stock price drops significantly, there might be a possibility of tender offers or hostile takeovers,' said Takamasa Ikeda, senior portfolio manager at GCI Asset Management, an investor in Japanese stocks. While Seven & I shares are higher than they were before Couche-Tard's interest became public in August 2024, they fell after the proposal was withdrawn this week and are down by more than a fifth this year. Newly appointed CEO Stephen Dacus is under pressure to convince stakeholders that sweeping reforms will deliver, especially in the U.S. and Japan, where inflation and weak demand are weighing on profits. Seven & I is taking steps to bolster its shares with a five-year, ¥2 trillion buyback. So far, that hasn't done much, with the stock down about 7.8% since the repurchase was announced March 6. Some of the funding for that was due to come from an initial public offering of the U.S. business, but Couche-Tard's exit has raised doubts over whether that plan will remain intact. Further investor-friendly efforts will be harder to enact, given that Seven & I has already taken drastic steps to overhaul the business, according to Taku Sugawara, an analyst at Iwai Cosmo Securities. The operator of 7-Eleven stores is on track to sell off its less-profitable retail operations in a deal that will close in September, part of the package of sweeping changes announced since Couche-Tard's approach. The campaign, which if successful would have been the biggest foreign takeover of a Japanese company, ended in acrimony. In a 1,500-word missive, Couche-Tard said Seven & I's founding Ito family had never been open to talks and blamed the board for a "calculated campaign of obfuscation and delay.' Seven & I responded by saying it was disappointed by Couche-Tard's decision to walk away, and disagreed with what it called "numerous mischaracterizations' in the letter. The remaining path for Seven & I is to pursue greater growth and profitability in the convenience stores business, which investors have been clamoring for. Two years ago, activist fund ValueAct Capital Management pushed for this strategy and unsuccessfully sought to replace Ryuichi Isaka, the prior CEO. One issue is Seven & I's underlying performance. While operating profit for the March-May period rose 9.7% year-on-year to ¥65.1 billion, it was the second-lowest quarterly result in the past decade. Domestic same-store sales remained almost flat, lagging behind competitors. The U.S. operations squeezed out profits thanks to cost-cutting measures, but revenue remains weak. "We are closely watching how far Mr. Dacus can go in supporting and managing improvements in performance,' said Takahiro Kazahaya, a senior analyst at UBS Securities. The CEO is due to give an update on its turnaround strategy in August, with a focus on how he plans to improve the core convenience stores business. Seven & I has a long history of enacting reforms under external pressure. In 2016, concerns raised by activist fund Third Point over executive appointments resulted in the exit of former Chairman Toshifumi Suzuki and Isaka's appointment. ValueAct's pressure campaign helped fuel Seven & I's decision to sell its Sogo & Seibu department stores to Fortress Investment Group in 2022 for ¥250 billion. The latest reforms were accelerated by Couche-Tard's approach, according to Kazahaya. While Couche-Tard may have stepped away, its decision to provide a detailed explanation in a long letter may tempt other potential bidders, activist investors, or even rivals, to join the fray. One investor pointed out that the Canadian operator of Circle K stores could have issued a one-line statement, but chose instead to disclose details of its discussions with Seven & I, including the amount of the termination fee ($1.2 billion) and alternate merger scenarios that were discussed. Artisan Partners Asset Management was especially vocal during Couche-Tard's campaign, pressing the company to engage more deeply with the Canadian retailer. In a letter sent to the company's directors in March, the U.S. investment firm cited concerns around potential conflicts of interest and the board's "failure to pursue the path that offers the best future for the company and maximizes value.' Another possibility is the resurrection of a management buyout by Seven & I's founding Ito family. A ¥9 trillion proposal to take the retailer private imploded in March after the buyout group, which included Itochu, failed to secure financing. The lackluster share price also makes Seven & I a prime candidate to be taken private by insiders.
Japan Times
4 days ago
- Business
- Japan Times
Couche-Tard abandons $46 billion bid to acquire Seven & I
Canada's Alimentation Couche-Tard has abandoned its ¥6.77 trillion ($45.8 billion) bid to buy Seven & I Holdings, saying the Japanese operator of 7-Eleven convenience stores had refused to engage meaningfully during the almost yearlong pursuit. "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 to Seven & I's board, released late Wednesday. "Rather, you have engaged in a calculated campaign of obfuscation and delay, to the great detriment of 7&i and its shareholders.' Seven & I's stock, which is up more than 25% since Couche-Tard's interest became public 11 months ago, is likely to decline due to the withdrawn proposal. The stock was suspended from trading early Thursday in Tokyo. The Japanese retailer has sought to make a case for remaining independent and made sweeping changes, appointing Stephen Dacus as CEO, selling its superstore business for $5.4 billion, launching a share buyback program worth ¥2 trillion and listing its U.S. business. In a statement, Seven & I said it regretted Couche-Tard's decision to walk away, but said many of the reasons given were inaccurate and unacceptable. The company said it will continue to implement its strategy to create value for shareholders. "The moat of Japanese protectionism proved too much for Couche-Tard to cross,' Andrew Jackson, head of Japan equity strategy at Ortus Advisors, wrote in a note. "It was always highly unlikely that this was going to be successful given Seven & I's positioning as one of Japan's most successful global companies and the fast closing of the ranks.' "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,' Couche-Tard said in 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.' Before the proposal to buy Seven & I became public, an attempt to acquire such a well-known Japanese business at such scale was seen as audacious and unlikely, given the protectionist tendencies of the government and corporate boards prioritizing stability over shareholder value. That view may remain in place for a while, despite changes to corporate guidelines aimed at injecting more vigor into corporate Japan through improved governance and protections for investors. Couche-Tard, which operates Circle K stores globally, disclosed that it has proposed alternate arrangements for a deal, including buying Seven & I's international business and taking a minority stake in the Japanese business. Bouchard, who co-founded Couche-Tard, said in March that there was a possibility of "enhancing' the buyout proposal with better access to financial information. Since then, the two parties signed a non-disclosure agreement to share information, but Couche-Tard said in the letter that the level of engagement wasn't enough. Most of the information shared by Seven & I was minimal or already publicly available, and meetings with management were superficial, or tightly scripted, according to Couche-Tard. "None of our critical questions were answered,' the company said. In one meeting in Dallas, Couche-Tard said a Seven & I executive who attempted to "thoughtfully address' a question related to international licensees was interrupted and rebuked by Dacus, who pointed to his head as if to remind his colleague to "think.' Seven & I has cited concerns over potential pushback from U.S. antitrust regulators over any deal to combine with Couche-Tard. In order to address this risk, the two sides agreed earlier this year to seek potential buyers for about 2,000 North American convenience stores. Although several parties expressed interest in acquiring the stores, Seven & I didn't share "required information with potential buyers, which is inconsistent with our collective objectives and does not reflect a constructive intent,' Couche-Tard said. There will be greater pressure on Seven & I's management to deliver after Couche-Tard's withdrawal, according to Bloomberg Intelligence analyst Lea El-Hage. "Its August strategy update will be key to demonstrating its standalone plan can generate more value than the rejected acquisition,' El-Hage wrote in a note, referring to a management update planned by Seven & I next month.
Wall Street Journal
4 days ago
- Business
- Wall Street Journal
Alimentation Couche-Tard Withdraws Seven & i Acquisition Proposal
Alimentation Couche-Tard ATD 0.32%increase; green up pointing triangle ended its bid to buy Japan's Seven & i 3382 0.52%increase; green up pointing triangle Holdings. The Canadian company said Wednesday it was cancelling the deal due to a lack of constructive engagement.
