What does Seven & i's 'core' classification mean to Couche-Tard takeover efforts?
Japan's Ministry of Finance on Friday reclassified retail giant Seven & i Holdings as "core" to national security, according to an updated list published by the government.
Various media agencies question whether it is a defensive manoeuvre by the owner of 7-Eleven convenience stores, which last week rejected a $38.5 billion buyout offer from Alimentation Couche-Tard Inc.
READ: Japanese 7-Eleven convenience store chain operator turns down Couche-Tard takeover offer
In a letter made public, Stephen Dacus, head of a special committee examining the proposed takeover, said: After a thorough review and discussion of your proposal, the Seven & i board has unanimously concluded, based on the unanimous recommendation of the special committee, that the proposal is not in the best interest of Seven & i shareholders and other stakeholders."
In turn, Couche-Tard doubled down, saying it was "disappointed" in the decision, but vowed to continue its bid.
In a news release September 8th, the Canadian convenience store operator said it believes the two companies can reach a mutually agreeable transaction.
"Couche-Tard has deep respect for 7&i and the business it has built in Japan and around the world, including its operating model, franchisee network and brand. We continue to have strong conviction that a combination with 7&i has clear strategic and financial benefits for both companies' customers, employees, franchisees and shareholders. We believe that, working together, we can successfully reach and complete a mutually agreeable transaction. We believe a combination would significantly enhance the important roles our companies play in our customers’ daily lives. Together, we would create a leading global retail platform with over 100,000 sites spanning Asia-Pacific, North America, Australia, and Europe. Our complementary businesses, shared values and excellent strategic fit would allow us to achieve significantly more together than we could individually. This includes further expanding the iconic 7-Eleven brand internationally, enhancing relationships with franchisees around the globe and attracting and retaining world-class talent. Together, we can drive growth, learn from each other’s operating expertise, benefit from shared best practices and deliver excellence to customers. This collaboration would also help us achieve both companies’ sustainability goals and drive innovation for the benefit of all stakeholders."
Seven & i said in a statement September 9th that remains open to talks if Couche-Tard puts forth a proposal that "fully recognizes Seven & i’s stand-alone intrinsic value" and addresses its regulatory concerns.
"As our board has previously discussed and stated, we do not believe that the proposal (Couche-Tard) put forward provides a basis for us to engage in substantive discussions regarding a potential transaction," the company said.
While Couche-Tard considers its next move, experts emphasize that Seven & i's new status doesn't put an end to a potential Couche-Tard takeover.
Japan regularly updates its core list and most recently add 88 companies, including Seven & i's.
When a company is categorized as core, foreign entities seeking to buy a stake of 1% or more in a Japanese firm must in principle file for a national security review with the Japanese government, according to Reuters: "In cases where a full buyout is sought, a review is mandatory for companies like Seven & i which are considered significant to Japan's economy or security regardless of whether they are categorized as core or non-core."