Seven & i Holdings, the owner of 7-Eleven, has decided to reject a takeover offer from Canadian convenience store operator Alimentation Couche-Tard. The company stated that the offer was not in the best interest of its shareholders and stakeholders. The special committee formed by Seven & i to evaluate the proposal found it to be “opportunistically timed” and believed it grossly undervalued the company’s potential for shareholder value in the near to medium-term. The rejection was based on the belief that there are multiple challenges, particularly in terms of U.S. anticompetition agencies, that the takeover would face.
Stephen Dacus, the chairman of the special committee, expressed concerns over the lack of consideration for regulatory hurdles in the proposal. He highlighted that Couche-Tard did not provide a clear timeline for clearing these regulatory challenges or offer specifics on how they intended to address them. This lack of clarity and uncertainty regarding the regulatory process was a significant factor in the decision to reject the offer. Dacus emphasized that the company was open to considering proposals that benefit its stakeholders and shareholders, as long as they address these regulatory concerns and do not undervalue the company.
Artisan Partners, a U.S. fund that holds a stake in Seven & i Holdings, had previously urged the company to consider the buyout offer and explore options for its Japanese subsidiaries. Ben Herrick, an associate portfolio manager at Artisan Partners, stated that the current management team and board had not taken adequate steps to maximize the value of the company. The fund believed that there was untapped potential in international licensees operating outside the United States and that capital allocation overseas had been overlooked. Herrick also pointed out that the company’s slow pace of adopting changes was a cause for concern, specifically in terms of oversight and accounting.
In contrast to Artisan Partners’ perspective, Richard Kaye, a portfolio manager at Comgest, disagreed with the notion that a radical reform was necessary through a foreign acquisition. Kaye commended Seven & i Holdings for its logistics and product innovation capabilities, suggesting that the company was already performing exceptionally well in these areas. He believed that the assumption that a foreign acquirer could significantly improve the company’s operations was unfounded. Kaye’s viewpoint contradicted the belief held by Artisan Partners that there was a need for significant changes in the company’s approach to international expansion.
Seven & i Holdings’ rejection of the takeover offer from Alimentation Couche-Tard was driven by concerns regarding regulatory hurdles, the undervaluation of the company’s potential, and the lack of clarity in the proposal. External perspectives from Artisan Partners and Comgest offered differing views on the need for reform within the company, with Artisan Partners advocating for a more aggressive approach to capital allocation and oversight. The conflicting opinions presented a nuanced picture of the challenges and opportunities facing Seven & i Holdings in the current market environment.