TOKYO (Reuters) -The founding Ito family of Japan’s Seven & i Holdings failed to secure financing for a $58 billion management buyout, sending its shares plunging and offering fresh impetus to a rival bid from Canada’s Alimentation Couche-Tard.
“There is no actionable proposal from Mr. Junro Ito and Ito-Kogyo for 7&i to consider at this time,” the company said in a statement, adding that it “continues to assess a full range of strategic alternatives” including Couche-Tard’s $47 billion bid.
Couche-Tard, which owns Circle K convenience stores, had offered $38.5 billion, but raised it after Seven & i rejected the initial bid.
“It gives ACT a fresh opening because there’s no competition now and the board can no longer rely on the management buyout,” said Travis Lundy, a special situations analyst who publishes on Smartkarma.
If Couche-Tard does succeed in winning control of Seven & i, it will be the biggest takeover of a Japanese company.
The latest development comes after Itochu, which owns rival convenience store chain FamilyMart, said it had ended its consideration of participating in the Seven & I founding family’s buyout proposal.
Shares in Seven & i, which owns 7-Eleven convenience stores, sank 11.7% in Tokyo in the largest one-day drop in more than a decade. Itochu shares rose 5%.
U.S-based Artisan Partners has been highly critical of the retailer’s management, urging the company to consider a competitive bidding process for takeover proposals.
The fund declined to comment on the failure of the Ito family to secure financing for their MBO.
Seven & i’s handling of ACT’s takeover bid is widely seen as a test case for companies in Japan, which are under pressure to strengthen corporate governance.
“Investors may question whether Seven & i is doing all it can to make an ACT bid viable,” Lundy said.
The Ito family began talks to take the convenience store owner private in what would have been the largest management buyout in history if successful after Seven & i received the Couche-Tard bid last year.
Couche-Tard reiterated that it was committed to reaching a mutually agreeable transaction with Seven & i.
Consumer analyst Hiroaki Watanabe said Couche-Tard is probably mainly interested in Seven & i’s North American stores and most franchisees in Japan would not welcome a foreign owner.
“Japanese convenience stores operate in a way that even top-quality domestic companies struggle with, let alone foreign firms,” said Watanabe, who worked at the retailer Lawson for more than two decades.
Seven & i was classified as “core” to Japan’s national security in September, although the finance ministry said at the time it would not create hurdles for a buyout.
The retailer is separately nearing a deal to sell non-core assets to private equity firm Bain Capital, Reuters has reported.
(Reporting by Kantaro Komiya, Satoshi Sugiyama, and Rocky Swift; Additional reporting by Mariko Yamazaki and Mariko Katsumura; Editing by Jamie Freed & Shri Navaratnam)
