By Anton Bridge and Abigail Summerville
TOKYO/NEW YORK (Reuters) -Alimentation Couche-Tard is seeking to win over the Japanese public for its $47 billion bid for Seven & i on Thursday and address antitrust concerns that have emerged as a major stumbling block in its quest to buy the 7-Eleven owner.
Canada’s Couche-Tard, which owns the Circle-K convenience store chain, has been pursuing Seven & i for months even as it has received a frosty reception from the Japanese retail giant, in what would be Japan’s largest-ever foreign buyout if the deal is completed.
Executives from Couche-Tard are holding their first press conference in Tokyo on Thursday, months after announcing a bid for Seven & i in August and highlighting the Canadian company’s recent push to woo a Japanese public sceptical of a foreign takeover.
The event comes a day after two of Seven & i’s independent directors resigned from the board, a development that one shareholder, U.S.-based Artisan Partners said was a “sign of dysfunction” at Seven & i. Artisan has repeatedly called on the Japanese company to engage more actively with Couche-Tard.
Seven & i has repeatedly said that potential antitrust issues in the United States would make the proposed takeover difficult.
Couche-Tard said this week it was confident there was a “clear path” to overcome any U.S. regulatory hurdles and expressed frustration at the 7-Eleven owner’s “limited engagement.”
Couche-Tard also said it had been working with Seven & i on a plan to divest some of their stores in the United States.
Seven & i’s newly appointed CEO Stephen Dacus has reiterated that significant regulatory hurdles stand in the way of a deal. The firms are the top two players in the U.S. convenience store market, with about 20,000 locations between them.
Couche-Tard has offered to pay $18.19 per share in Seven & i, representing a roughly 23% premium over the Japanese company’s share price of 2,196 yen ($14.82) on Thursday.
ANTITRUST ISSUES
Couche-Tard management’s trip to Tokyo and the engagement with Seven & i on antitrust concerns underscore the lengths to which dealmakers would go to ensure deal certainty amid U.S. regulatory scrutiny.
To engage in detailed divestment discussions for antitrust purposes before a deal is agreed or any confidentiality agreement is signed is uncommon in transactions, deal advisers said.
“I can’t say I’ve seen a case where prior to a merger agreement being executed the entire divestiture package and buyer were set in stone and baked into the merger agreement,” said Kathy O’Neill, a partner at law firm Fried Frank.
But she said working on a divestiture package before a merger agreement was reached would help to potentially reduce the risk of surprise and time and effort put into chasing a deal.
Tim Cornell, a litigation partner and member of the Debevoise & Plimpton’s Antitrust Group, agreed the airing of antitrust concerns before a deal was announced was not typical.
“In certain circumstances, buyers will test the waters with regards to a divestiture package especially where they’ve identified that’s what is needed,” he said.
Couche-Tard sweetened its offer in October and has said it remained committed to the deal, after a competing $58 billion management buyout proposed by Seven & i’s founding family failed to materialise.
(Reporting by Abigail Summerville in New York and Anton Bridge in Tokyo; Writing by Kane Wu and David Dolan; Editing by Sumeet Chatterjee and Jamie Freed)
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