Couche-Tard hikes bid for 7-Eleven owner to $47 billion, sources say

Canada's Alimentation Couche-Tard (ACT) has submitted a revised offer for Seven & i Holdings, according to the Japanese company on Wednesday. Two sources familiar with the situation indicated that the new bid represents a 22% increase, bringing it to approximately $47 billion.

Should the deal proceed, it would mark the largest overseas acquisition of a Japanese company in history.

The sources requested anonymity as the pricing details have not been publicly disclosed.

Bloomberg initially reported the updated proposal of $18.19 per share, an increase from Couche-Tard's previous rejected offer of $14.86 per share, or around $38.5 billion.

Seven & i stated in a release that the new proposal is private and non-binding, and the company intends to keep negotiations confidential as per Couche-Tard's request.

Couche-Tard, which owns Circle-K convenience stores, chose not to comment.

"The increased offer from ACT is far more compelling than the original proposal. While regulatory hurdles remain, the Seven & i board should engage to see if the deal can be progressed," remarked Manoj Jain, co-founder and co-CIO of Hong Kong-based Maso Capital.

Following the announcement, shares of Seven & i jumped nearly 12% before settling with a 4.7% increase, closing at 2,335 yen ($15.7), reflecting some skepticism among investors regarding the likelihood of a deal.

Last month, Seven & i stated that Couche-Tard's initial offer "grossly undervalues" the company and highlighted its strategy to enhance corporate value independently. This strategy now requires the company to demonstrate its plans for delivering better returns to investors, according to analysts and business leaders.

Critics of Seven & i, including foreign investors such as ValueAct Capital and Artisan Partners, argue that the company should concentrate on its core convenience store business, which encompasses over 80,000 7-Eleven locations globally. Its other operations include supermarkets, a bank, Denny's restaurants, and Tower Records.

Analysts and investors are eager for details on potential value enhancement plans, which are expected to be revealed during the group's second-quarter earnings report on Thursday. The Nikkei has reported that the report may indicate a 20% year-on-year decline in operating profit due to inflation affecting consumer spending in the U.S. market.

Seven & i, with its international convenience store business accounting for over 70% of consolidated revenue, noted that the projected 20% drop had not been disclosed by the company.

The company may also announce the sale of part of its stake in Seven Bank during the earnings announcement, according to Travis Lundy of Quiddity Advisors, who suggested this would position it as a "purer play."

Additionally, sources have informed Reuters that Seven & i is contemplating the sale of a stake in its supermarket division, which would expedite its plans for an initial public offering of that unit, first announced in April.

The group is also reportedly considering a name change to better reflect its increased focus on the convenience store sector, as reported by TV Tokyo on Wednesday.

Last month, the retail giant was designated as "core" to national security, a designation that is believed to heighten regulatory challenges to a potential buyout. However, a finance ministry official has stated that this designation does not alter the level of government scrutiny or the review process for any acquisition proposals.

($1 = 148.2400 yen)