Seven & i: How Will Firm’s Convenience Stores Be Affected by Acquisition Proposal?

Editorial

14:59 JST, September 3, 2024

The possibility of more acquisition proposals from foreign companies for Japanese firms that are seen as undervalued due to the weak yen is increasing. The growth strategies of Japanese companies will likely be tested to increase their corporate value.

Seven & i Holdings Co. received an acquisition proposal from leading Canadian convenience store operator Alimentation Couche-Tard Inc. Seven & i said the proposal is preliminary and not legally binding.

Couche-Tard operates in about 30 countries and regions, including the United States and Europe, and it has a market capitalization of more than ¥8 trillion, far exceeding that of Seven & i. If the acquisition is realized, it would be one of the largest acquisitions of a Japanese company by a foreign firm and would have a major impact.

Seven & i’s 7-Eleven convenience stores have taken root as infrastructure with their 24-hour operation and wide-ranging product lineup. There is much interest in whether they would be able to maintain their current operations under the umbrella of a foreign company.

Meanwhile, some believe that Couche-Tard may be more interested in Seven & i’s convenience store business in the United States than in its business in Japan.

Seven & i has established a special committee composed of outside directors to scrutinize the proposal and decide whether to accept it. The committee should review the proposal from multifaceted perspectives, including the improvement of corporate value, the interests of shareholders and social responsibility.

In the past, whether it was in Japan or abroad, management of target companies often turned down acquisition proposals on no reasonable grounds, simply being wary of acquisition proposals as takeover attempts.

However, the Economy, Trade and Industry Ministry formulated new guidelines last summer regarding corporate acquisitions that make such a response more difficult. This is because the guidelines now require that accepting an acquisition proposal be an option if it will lead to efficient management and benefit shareholders.

Seven & i needs to carefully explain externally the reasons once it reaches its decision on the proposal.

In recent years, to concentrate on its highly profitable convenience store business, Seven & i has been pursuing management reforms, including the sale of its Sogo & Seibu Co. department store operator to an investment fund. The number of its convenience stores in the United States, which is the largest in the country, was further boosted by the acquisition of Speedway LLC of the United States.

Nevertheless, the sale of Sogo & Seibu caused some turmoil, drawing criticism over the slow pace of reform, and Seven & i’s stock price has been stagnant for a long time. The latest acquisition proposal can be said to be a test of how the company responds to its long-standing problems.

The government is stepping up measures to increase inward direct investment through such steps as companies from abroad making acquisitions and constructing factories. If undervalued stock prices are left unaddressed, companies will easily become targets for acquisition by foreign capital.

The best way for companies to deal with such a situation is to increase their profitability and maintain high stock prices. The latest acquisition proposal is a significant lesson for Japanese companies as a whole.

(From The Yomiuri Shimbun, Sept. 3, 2024)