7-Eleven owner Seven & I's stock surges as Couche-Tard submits record buyout offer

Seven & i is best known for its 7-Eleven stores, but its operations also include Denny’s Corp.’s Japan restaurants, the Ito-Yokado supermarket chain and its own bank. Image: Bloomberg

Shares in Seven & i Holdings Co., one of Japan’s biggest retailers, surged after the firm said it’s received a buyout proposal from Canadian convenience-store operator Alimentation Couche-Tard Inc., in what would likely be the largest-ever foreign takeover of a Japanese company.

The “confidential, preliminary” offer will be examined by an independent committee and the board of directors has made no determination at this time whether to accept or reject it, the retailer said in a statement Monday.

Seven & i’s statement came shortly after the Nikkei newspaper reported the buyout offer, which it said would have to be at least ¥5 trillion ($34.3 billion) or more, given the company’s market capitalization.

Shares surged 22.7% to ¥2,161 in Tokyo on Monday, clocking its biggest daily gains on record.
Seven & i has come under pressure from activist fund ValueAct Capital Management LP over future business strategy. It took restructuring measures and initiated a buyback after fending off efforts to oust Chief Executive Officer Ryuichi Isaka. In April it said it’s considering a separate listing of its supermarket arm Ito-Yokado so that the company can focus on expanding its convenience-store chain.

Couche-Tard, with a market value of C$80 billion ($58.5 billion), operates convenience stores globally under its own brand, as well as Circle K and Ingo.

Seven & i is best known for its 7-Eleven stores, but its operations also include Denny’s Corp.’s Japan restaurants, the Ito-Yokado supermarket chain and its own bank.

Although American in origin, the convenience store concept turned out to be transformational for Japanese retailer Ito-Yokado, which fully took over the chain in 2005 in the US and embraced it as part of its name. Seven & i now comprises an empire spanning 85,000 convenience stores, gasoline stations and retail outlets.

Meanwhile 7-Eleven is also looking to overhaul its operation in the US, trying to export the model that made the convenience store a resounding success in Japan to America.

“It’s been a big under-performing retailer in the past two years and their restructuring very slow for investors,” said Amir Anvarzadeh, a strategist at Asymmetric Advisors Pte., noting that the weak yen is a factor for Couche-Tard’s approach now.

Since 7-Eleven assets are “high quality” the company could do well over the longer term if it sells off other assets, he said.