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Some of the world’s biggest private equity firms are looking at ways to take part in a deal for Japan’s Seven & i Holdings after a takeover approach for the convenience store group from a Canadian rival.
Canada’s Alimentation Couche-Tard said this week it had made a “friendly, non-binding proposal” to the Tokyo-listed operator of the 7-Eleven chain.
The approach is unsolicited and a takeover of Seven & i would be the biggest foreign deal for a Japanese company. The deal is expected to face regulatory obstacles in both the US and Japan.
Private equity executives in Tokyo said the bid could create opportunities to co-operate with either Seven & i or Couche-Tard, take part in a break-up of the retail conglomerate, or take on a “white knight” role if a battle for control of Seven & i were to turn hostile or broaden into a wider competition for control.
People close to each of KKR, Bain Capital, Blackstone and EQT said they were not in direct contact with Seven & i but one senior executive said private equity groups were “watching this closely as we have watched anything here”.
“Suddenly we are in a situation where the future ownership of a major Japanese company is in doubt, and so naturally PE will want to get involved,” said the executive.
Another said there were “multiple plausible opportunities for involvement”.
The 16,700-strong network of convenience stores and petrol stations run by Couche-Tard under the Circle K brand are overwhelmingly concentrated in Canada and North America. In investor presentations in 2021, Couche-Tard described the rest of the world as “white space” opportunity and said it had “the balance sheet to consider very large deals where only a few others can play”.
Seven & i has a larger global network of almost 85,000 stores, but analysts point out that earnings are almost entirely generated from the 21,000 outlets in Japan, the 13,000 in the US and roughly 600 under its subsidiaries in China.
Analysts have speculated that Couche-Tard is primarily interested in the Japanese company’s store network in the US, opening the possibility that a deal might split Seven & i and leave a Japan- and Asia-focused business available for separate acquisition.
Although few details of the Canadian offer have been made public, brokers said funds had bought shares in Seven & i since Monday on the expectation that a deal would value the Japanese target at more than $35bn and draw in corporate or financial bidders.
KKR, Blackstone, Bain and EQT declined to comment. Seven & i and Couche-Tard declined to comment.
M&A bankers and lawyers say a takeover bid for Seven & i could be a turning point for dealmaking in Japan, testing the country’s tolerance for large-scale unsolicited bids and for the potential passing of national icons into foreign hands.
In accordance with Japan’s recently revised M&A guidelines, which encourage companies to take any bona fide offers seriously, Seven & i has established a special committee to examine Couche-Tard’s proposal, which people close to the situation said was likely to make its preliminary judgment in mid-September.
Tomochika Kitaoka, Japan equity strategist at Nomura, said the M&A guidelines could be interpreted as justifying hostile takeovers provided they improve corporate value and ensure shareholder returns.