7-Eleven, the operator of the popular convenience store chain, has rejected a buyout offer from Canadian company Alimentation Couche-Tard. The $38.5 billion bid was deemed to undervalue the company by Seven & i Holdings, the parent company of 7-Eleven. In a letter to Couche-Tard, Stephen Dacus, chair of Seven & i’s board, stated that the offer did not adequately recognize the company’s value and did not provide a basis for substantive discussions. The Japan-based company also highlighted the regulatory challenges that a potential transaction would face in the current environment.
The rejection of the offer by Seven & i reflects their belief that the bid does not align with the company’s intrinsic value. Despite the possibility of an increased offer from Couche-Tard, Seven & i expressed skepticism about the deal’s chances of closure. This is due to the potential hurdles from U.S. competition law enforcement agencies. The company’s management believes that the offer was “opportunistically timed” and that Couche-Tard has not demonstrated a commitment to obtaining regulatory clearance.
The announcement of the bid had a mixed impact on Seven & i’s stock, with shares fluctuating before closing slightly lower. However, the closing price remained above the proposed offer per share. Couche-Tard’s shares, on the other hand, have declined since the bid was made public. Despite this, the Canadian company remains committed to pursuing a mutually agreeable transaction that could benefit both companies and their stakeholders.
While Seven & i has a much larger market presence than Couche-Tard, it has faced challenges in recent years. The company’s shares have underperformed, leading to criticism from investors about its management and asset structure. In response, Seven & i has made strategic moves such as closing supermarkets, exiting the apparel business, and selling its department store unit. These actions were taken to address the concerns raised by investors, including ValueAct Capital.
In conclusion, the rejection of the buyout offer by 7-Eleven’s operator highlights the company’s belief that the bid undervalues its worth. The challenges posed by regulatory agencies and the need for a mutually agreeable transaction further complicate the potential deal. Meanwhile, Seven & i is taking steps to address investor concerns and improve its performance in the market. The outcome of this situation will have a significant impact on the future of both companies and their stakeholders.
