(Bloomberg) — Seven & i Holdings Co. shares plunged after a proposed ¥9 trillion ($60 billion) management buyout collapsed, increasing pressure on the Japanese convenience store chain to engage with a rival bid from Canada’s Alimentation Couche-Tard Inc.
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The buyout group, which included the founding Ito family and Itochu Corp., was unable to arrange the financing required to submit a definitive proposal for what would have been the biggest ever acquisition in Japan, Seven & i said in a statement Thursday.
Seven & i shares dropped as much as 12.5% in Tokyo trading on Thursday, slicing the company’s market value to around $38 billion. Itochu gained as much as 6.8%.
The buyout plan was initially put together in November to fend off Couche-Tard, which has proposed to acquire the Japanese retailer at a valuation closer to $47 billion. With the management buyout off the table, Seven & i Chief Executive Officer Ryuichi Isaka may have little choice but to finally enter negotiations with Couche-Tard.
Negotiations within the buyout consortium had also stalled over disagreements on who would control the 7-Eleven operator after it’s taken private, Bloomberg News reported Wednesday.
“I have felt the MBO proposal by the founding family was a bit unrealistic,” said Yasuo Sakuma, president at Libra Investments. “A takeover by Couche-Tard will likely become the main scenario from here.”
Couche-Tard, the owner of the Circle-K chain of convenience stores, is keeping up its pursuit of Seven & i but has yet to gain access to the Japanese company’s finances, months after proposing a takeover, Bloomberg News reported Thursday, citing people with knowledge of the matter.
In its statement Thursday, Seven & i said it “remains committed to exploring all opportunities to unlock value for shareholders” and continues to assess Couche-Tard’s proposal. It is engaging constructively with the Canadian company to determine if an actionable proposal can be achieved that addresses the serious US antitrust challenges any transaction would face, it said in the statement.
Couche-Tard signaled its interest more than six months ago, then increased its proposed price in September.
The heirs of Seven and i’s founder were set to contribute around ¥500 billion to the buyout, while trading house Itochu would put up more than ¥1 trillion, with the rest of the funding coming from other strategic investors and Japan’s top banks, people familiar with the plans had said. Apollo Global Management Inc., KKR & Co. and CP All Plc, which runs the Thai franchise for 7-Eleven, were all also weighing plans to take equity in the group.
