7-Eleven says bid from owner of Circle K is too low
Seven & i Holdings plans to tell Alimentation Couche-Tard that its offer price for the Japanese convenience store operator is insufficient and that competition law concerns remain.
Seven & i is the company behind the 7-Eleven convenience store brand while Alimentation Couche-Tard owns Circle K.
The company’s board will send a letter to Couche-Tard today, outlining its response to the proposal following a review by a committee of independent outside directors, according to people familiar with the matter.
Seven & i will tell the Canadian company that its bid doesn’t reflect the value of its business and growth strategy.
Couche-Tard’s offer was just under $15 (€13) per share, according to a person familiar with the matter. That would value the Japanese company at about $42bn at the time of the offer.
Seven & I will also raise concerns about breaching US antitrust laws in the letter. A company spokesperson declined to comment.
Alex Miller, Couche-Tard’s incoming chief executive officer, told analysts yesterday the company wants to engage “constructively” with Seven & i and that it is confident it can finance the deal.
“We see a strong opportunity to grow together, enhance our offerings to customers and deliver a compelling outcome for the shareholders, employees and key constituencies of both companies,” Mr Miller said. He did not provide any comment about Seven & i’s letter or the offer price.
Couche-Tard can raise its leverage ratio to 3.75 with no impact on its credit rating, say executives.
As of July 21, that ratio was 2.1 times, based on net debt to earnings before interest, taxes, depreciation and amortisation.
“Perhaps the silver lining here is that discussions continue, and it appears Seven & i might just have shareholder interest in mind, assuming this just isn’t a facade,” Tyler Tebbs, CEO of research company Tebbs Capital, said in a note to clients.
Couche-Tard revealed its takeover approach for the parent company of the 7-Eleven convenience store chain in August. The proceedings are being closely watched in Japan and abroad as a test of new government guidelines on mergers and acquisitions instructing companies to seriously consider takeover offers.
A union of the two companies would create a global convenience store behemoth with more than 100,000 stores. But that may invite scrutiny from US competition authorities.