The M&A action in the convenience store / fuel retail space is wild – Circle K parent company wanting to buy 7-11 parent company for $47B! https://t.co/mi391nzCl1
— Branden Flasch (@brandenflasch) October 10, 2024
Seven & i Holdings announced on Thursday a roadmap to hive off underperforming businesses and focus on its convenience store operations, as the retailer aims to fend off a $47-billion takeover bid from Canada’s Alimentation Couche-Tard. The Japanese company plans asset disposals to streamline its operations and concentrate on its core convenience store business under a new holding company, York Holdings. This new entity will include 31 subsidiaries.
Additionally, Seven & i has revised down its profit forecast amid the ongoing takeover battle.
🇯🇵 Seven & i shares jump after Couche-Tard says it is ready to pay $47bn
https://t.co/G70m6Zo3vY— Neil Saunders (@NeilRetail) October 9, 2024
The revised forecast aims to reflect a strategic shift towards more profitable and sustainable growth avenues as the company negotiates the offer from the Canadian convenience store operator. Seven & i Holdings has significantly slashed its earnings forecast for the fiscal year ending February 2025.
On @CNBC today, #CLSA Japan Strategist Nicholas Smith provided his views on the $47 billion enlarged bid from Alimentation Couche-Tard (ACT) for Seven & i Holdings, the parent company of 7-Eleven.
To hear more from Nick: https://t.co/fUVt1L8Uq2#CLSANews #CLSAInsights
— CITIC CLSA (@CLSAInsights) October 10, 2024
The owner of 7-Eleven stores announced it now expects a net income of 163 billion yen ($1.09 billion), marking a 44.4% reduction from its prior forecast of 293 billion yen. This revision comes as the company reported a first-half net profit of 52.24 billion yen on 6.04 trillion yen in revenue. While sales exceeded forecasts, profits fell considerably short of their previously anticipated 111 billion yen.
The company attributed this decline to fewer customers at its overseas convenience stores, as consumers exercised more caution in their spending. In response to investor pressure to streamline its vast portfolio, Seven & i Holdings confirmed it will establish an intermediate holding company to manage its supermarket, specialty store, and other businesses.
seven & i restructuring plans
This restructuring includes the spin-off of non-core businesses into a standalone subsidiary and is part of a broader plan to consolidate 31 units. The retail giant also reported a charge of 45.88 billion yen related to its spin-off of Ito-Yokado Online Supermarket. This move is seen as a strategic step amidst a rising consolidation trend in the global retail sector.
In September, Seven & i Holdings rejected a takeover bid from Canadian convenience store operator Alimentation Couche-Tard (ACT), which offered $14.86 per share. The board deemed the offer insufficient and expressed concerns about U.S. antitrust laws. Despite this, ACT raised its offer by approximately 20% to $18.19 per share, valuing Seven & i at around 7 trillion yen.
If accepted, this could become the largest foreign takeover of a Japanese company. As of Thursday’s close, Seven & i shares were traded at 2,325 yen, reflecting a 33% surge since ACT’s buyout interest became public. Jesper Koll, head of Japan at Monex Group, highlighted that ACT’s revised offer represents a 53% premium over the share price before the initial bid.
“The money they offer is good, but there is more at stake than just numbers,” Koll said. Amir Anvarzadeh, a Japan equity market strategist at Asymmetric Advisors, echoed this sentiment, emphasizing that the pressure is on Seven & i’s management to expedite their restructuring plans and maintain independence.
- Bloomberg.”Seven & I Should Sell Businesses to Defend Takeover Bid, Academic Says”.
- CNBC.”7-Eleven’s parent company cuts full-year earnings forecast, presses ahead with restructuring”.
- Reuters.”Japan’s Seven & i, facing a $47 billion Couche-Tard bid, to separate some assets”.