7-Eleven owner rejects $38.7 billion takeover offer from rivals

The Japanese owner of convenience store chain 7-Eleven has rejected a $38 billion (£29.2 billion) takeover offer from Canadian rival Alimentation Couche-Tard.

In a letter to Seven & i Holdings told the potential buyer that the Circle K owner’s offer “vastly undervalued” the company and was subject to regulatory risks.

However, the 7-Eleven owner added that he remains open to negotiations and willing to consider a better offer.

If successful, the takeover would create a global convenience store giant with 100,000 stores.

Stephen Dacus, the chairman of Seven & i’s board, which is considering the deal, said in a letter that the proposal was “well-timed”.

The proposal, Mr Dacus added, “vastly undervalues ​​the Japanese retail giant” and shows that it has the potential to create more value for shareholders.

Alimentation Couche-Tard (ACT), based in Quebec, operates around 17,000 stores in North America, Europe and Asia under the Circle K and Couche-Tard brands.

The potential buyer’s original offer valued Seven & i at $14.86 per share, more than 20 percent higher than the share price before the offer was announced.

The offer came at a time when the Japanese yen was significantly weaker than the US dollar, which Seven & i more affordable for foreign buyers.

Seven & i rejected the offer and also pointed to the “numerous and significant challenges” that a deal would bring with it from the US competition authorities.

7-Eleven is the world’s largest convenience store chain with 85,000 stores in 20 countries and territories.

If the deal goes through, ACT’s presence in the U.S. and Canada would more than double to around 20,000 locations.

Never before has a Japanese company of this size been bought by a foreign company.

Historically, Japanese companies have been more likely to acquire foreign companies.

“Japan needs to protect its national assets … and Seven & i is a significant asset, so expect this to be a lengthy negotiation process,” said Neil Newman, head of strategy at Astris Advisory Japan.

“If it succeeds … it would show that Japan is open for business and welcomes foreign investment.”

Last year, the Japanese government issued new mergers and acquisitions guidelines, urging companies not to reject credible takeover offers without serious consideration.

ACT did not immediately respond to BBC News’ request for comment.