Seven & i holdings (7&i) seem to hold a defensive stance with Alimentation Couche Tard (ACD), after ACD offered a bid worth $47bn for the acquisition of 7&i holdings. Circle K owned by ACD and 7-eleven owned by 7&i holdings are two major businesses that operate in the convenience store industry, and the possible revenue synergies poses a compelling argument to offer a bid.
ACD could also benefit greatly from cost savings, as this deal could have realised cost synergies of $2.2 billion. ACD initially offered a bid of around $38 billion but was swiftly rejected because it was considered substantially undervalued for the company’s worth. The bid has come at a time when the Ito family, the founding family of 7&i holdings, was unable to acquire funding for its $58 billion management buyout of the company to make it private. These two competing bids has indeed created a tension in the air.
ACD is a Canadian company that specialises in convenience store operating and fuel retailing. Their main business line, Circle K, has established itself in many key locations including the United States, Canada, Ireland, Russia, Hong Kong and Vietnam to name a few. 7-eleven has certainly matched, if not surpassed, the growth experienced by Circle K, establishing itself as one of Japan’s most strategic business groups. Its strong market presence and attractive location strategy within Japan has allowed it to reach this status, catching the eyes of global investors. Alongside its long-standing business model, famously named the ‘Kobini model’, its recent restructuring plan involving the removal of underperforming stores has further improved its valuation prospects to potential investors.
The deal also sparks concerns over national interest as 7&i had changed its business status to ‘core’ instead of its previous ‘non-core’ title. This means that, if foreign investors wish to buy into a Japanese company, they must give a prior notice to the government if it wants to acquire more than 10%. 7&i holdings’ application to be a core business in Japan was approved shortly after ACD’s initial billion-dollar bid. The timing of this application could be interpreted as 7&i holdings’ move to protect itself against any uncertainty in control. After all, convenience stores like 7-eleven have been of great importance to rural areas and play a crucial role in living standards for many consumers.
Historically, Japan has had positive attitudes towards buying foreign companies but has not retained that same attitude towards selling its assets to foreign investors. However, these attitudes are gradually shifting. Stagnant domestic conditions, combined with increased competitive pressures abroad, have necessitated a more dynamic approach to selling non-core assets to survive and remain efficient in the market.