Participants taste onigiri at a product meeting for 7-Eleven Japan in Tokyo on January 23, 2024. Staff and suppliers discuss the taste, texture and filling of Japanese riceballs, one of 7-Eleven’s most important products, with more than 2 billion sold annually.
Noriko Hayashi Bloomberg Getty Images
Alimentation Couche-Tard’s proposal to buy the owner of 7-Eleven is likely to be driven by its affordability as a stock, compared to its global counterparts, because there is not much to add when it comes to the core business of Seven & i Holdings Co., Richard Kaye. , portfolio manager at independent asset management group Comgest, said on Friday.
Operator Circle K offered to acquire its Japanese rival last month. The amount has not been disclosed, but if a deal goes through, it could be the largest foreign takeover of a Japanese company.
On Friday, AS sought Artisan Partners Asset Management was urged Seven & i Holdings to “seriously consider” a buyout offer, and to request an offer for the Japanese subsidiary “as soon as possible.”
The offer comes amid a restructuring at the company, aimed at expanding 7-Eleven around the world as well as divesting its underperforming supermarket business.
“ACT is uniquely positioned to enhance the value of the company (Seven & i’s),” Artisan portfolio managers N. David Samra and Benjamin L. Herrick wrote in a letter, according to Reuters. “Negotiations with ACT are the best tactic to maintain a positive outcome for stakeholders in Japan.”
Kaye disagreed in an interview on CNBC’s “Squawk Box Asia,” saying Friday: “I don’t think there’s a case for radical reform that a foreign acquirer will do.”
The company is doing a “phenomenal job” in terms of logistics and product innovation” and “I think it’s very difficult to think that it could have been done better,” he said.
However, Kaye acknowledged that the company could be quicker to transform other segments, such as general merchandise stores.
But this business does not represent a detraction for Seven and i’s marginal profit or capital return, he added. “What (ACT) can see is a cheap stock, if I can be very honest.”
Seven & i currently trades at a price-to-earnings ratio of 27.96, and has a price-to-book ratio of 1.47, according to LSEG data.
ACT has about 16,700 stores worldwide, fewer than Seven & i Holdings’ roughly 85,800 stores, but the Canadian company was valued at $54 billion as markets closed Monday, compared with the Tokyo-listed company’s 5.26 trillion yen, or $38, 3 billion. .
Regulatory hurdles
The proposed deal would attract antitrust concerns in both countries, particularly in the US, retail analysts recently told CNBC.
“I would imagine that there will be some regulatory concerns and some divestment that will be necessary to get this (deal) going,” Bryan Gildenberg, managing director at Retail Cities, said on CNBC’s “Street Signs Asia” last month.
Bloomberg reported on August 27, citing people familiar with the matter, that Seven&i is seeking designation as a “core” company under the country’s Foreign Exchange and Foreign Trade Act, which requires Japan’s finance ministry to review entities that want to acquire more many. of 10% shares in the “core” company.
The company belongs to the aerospace, nuclear energy and rare earth sectors, the report added.
The move signals that Seven & i is worried that buying ACT could destroy “the carefully designed konbini business model, honed over decades, the very unique konbini business model that 7-Eleven has developed in Japan and is now re-exporting to the US,” said Kaye.
Konbini is a Japanese term used to describe the country’s convenience stores.
However, Kaye called the stock a “buying opportunity” in a pool of Japanese-listed global stocks, which includes global companies such as Fast Retail and Pan Pacific International Holdingswho wears Don Quijote’s chains.
These are “companies that carry out large operations even on a global basis, but are cheaper than their global counterparts,” he said.
