Couche-Tard's US$38.7bn bid rejected by Seven & i over price concerns

Seven & i Holdings Co. recently turned down Alimentation Couche-Tard Inc.’s takeover bid, emphasizing that the issue was the price, not the idea of an acquisition itself, according to BNN Bloomberg.  

This highlights a broader shift in Japan's corporate landscape, traditionally resistant to external takeovers due to entrenched interests. Regulatory and investor pressure is gradually reshaping this culture, making transformational deals more feasible. 

Wataru Tanaka, a University of Tokyo professor who helped develop government guidelines on takeovers, pointed out that companies are now expected to engage sincerely with acquisition proposals. “You can’t rebuff them at the door,” he said, signalling a new openness to corporate negotiations. 

Seven & i's independent directors reviewed Couche-Tard's offer of ¥5.55tn (US$38.7bn) and acknowledged that the proposal warranted consideration, stating that they would “sincerely consider any proposal that is in the best interests of shareholders and stakeholders.”  

The committee, led by Stephen Dacus, emphasized that while the price was too low, it did not outright reject the possibility of future discussions. The retailer also expressed concern over regulatory risks due to the overlap in the companies' operations. 

Regardless of the outcome, Japan is witnessing a surge in mergers and acquisitions. Improved governance, regulatory pressure, and clearer guidelines are facilitating this shift. 

For instance, a bidding war is underway for Fuji Soft Inc., a software developer valued at ¥644bn, demonstrating the changing corporate landscape in Japan. 

Zuhair Khan, a fund manager at Union Bancaire Privée, noted that the current environment is “completely different” from previous years, with merger opportunities becoming increasingly viable. 

Couche-Tard’s offer represents a 21 percent premium over Seven & i’s pre-announcement share price, but following the proposal’s disclosure, Seven & i's shares fell by 1.4 percent. 

Activist investors have long aimed to penetrate Japan’s corporate sector, but their success has varied. Aggressive public campaigns often faced resistance, while more subtle approaches tended to yield better results. 

Last year, KKR & Co., CVC Capital Partners, and Blackstone Inc. withdrew a buyout offer for Toshiba Corp. after encountering opposition, ultimately allowing a domestic consortium to prevail. 

Japan's Ministry of Economy, Trade and Industry has updated its guidelines on corporate takeovers, emphasizing that companies should evaluate potential deals based on their ability to “enhance corporate value” and improve “inefficient management.” 

This is part of a broader effort to stimulate the Japanese economy, which has struggled with decades of deflation and ultra-loose monetary policy. With the Bank of Japan contemplating rate hikes and the need for structural reform, the corporate landscape is poised for significant change, even if painful. 

Seven & i has requested government protection under the Foreign Exchange and Foreign Trade Act, seeking a change to its designation as ‘core’ to national security, which would require prior government notification for any purchase of more than 10 percent of its shares.  

However, this legislation was originally designed to encourage foreign investment rather than protect companies from foreign bids, making it less restrictive than similar laws in the US.  

For example, US President Joe Biden is expected to block Nippon Steel Corp.’s US$14.1bn acquisition of United States Steel Corp. due to security concerns. 

With Japan’s regulatory environment evolving in favour of mergers and acquisitions, it may be increasingly difficult for the government to intervene to protect companies like Seven & i. Khan highlighted that this marks a turning point for corporate Japan.  

“It’s sending a message to large corporate Japanese management that it doesn’t matter how big you are,” he said. “Global competitors now realize they can make a bid for almost any Japanese company.”