Out of the way. Sometimes silence is golden. Japan’s government will have to block or approve any formal takeover bid by Canada’s Alimentation Couche-Tard for Seven & i, the owner of 7-Eleven convenience stores. For now, though, Tokyo is better off keeping quiet.
Shops known as “conbini” are so embedded in everyday life in Japan that they are akin to national infrastructure. They are grocery stores and a place to pay bills, as well as to leave luggage before boarding a train. They provide vital services to rural communities when natural disasters strike. If the shops are not operating, it can disrupt people’s lives. In addition, Japan, like other developed countries, has stepped up its scrutiny of foreign investment in recent years.
The government will, however, have to weigh any concerns about a takeover by the Canadian operator of Circle-K stores against its official effort to improve corporate governance and shareholder value for Japanese companies. As part of a broad campaign to shake off three decades of economic stagnation, the Ministry of Economy, Trade and Industry is seeking to attract foreign direct investment and create a welcoming environment for outside investors, including activists. It is encouraging Japanese companies to seriously consider submitting viable, bona fide takeover bids. If policymakers were to oppose Couche-Tard, as French ministers did when the $55 billion company tried to buy supermarket operator Carrefour in 2021, they would undermine the message that Japan is open for business.
Fortunately, politicians can afford to stay quiet on the sidelines. The Couche-Tard bid is currently underway. without commitmentIf formalised, the special committee of Seven & i board members will have to assess it in relation to the company’s existing value creation plans. Obstacles In North America, competition could be a hurdle: Both companies are major convenience store operators. Even if Couche-Tard were to shed 10% of 7-Eleven stores in that region because of antitrust laws, it would still have seven times as many stores as the next-biggest competitor, Casey’s General Stores, according to JPMorgan analysts.
If the Quebec-based company makes a compelling offer directly to shareholders, however, it would put politicians in a bind. Japan rarely explicitly blocks foreign takeovers, preferring a passive-aggressive strategy that involves extending approval deadlines or quietly asking bidders to back off. In public, Japan may find it difficult to mount a strong defense of national interests. Seven & i, which is worth $37 billion, has more than 21,000 7-Eleven stores in Japan, but rival Lawson has nearly 15,000.
For now, Japanese officials can enjoy the benefits of a drive to create shareholder value that has produced a record number of institutional shareholder proposals and share buybacks by companies. But it has also emboldened buyers. With Seven & i shares hovering 16% above their price before Couche-Tard’s arrival, Tokyo could soon find itself in a sticky situation.
Context news
Seven & i confirmed on August 19 that it had received a preliminary, confidential, non-binding proposal from Canada’s Alimentation Couche-Tard to acquire all of the company’s outstanding shares. The Japanese company said its board of directors had formed a special committee to review the proposal, the company’s stand-alone plans and other alternatives, after which a response would be sent to the Canadian firm. Seven & i shares closed on August 26 16% above their price on August 16, the last trading day before Couche-Tard’s offer.
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