The Board of Seven & i Holdings has rejected an initial offer by Couche-Tard of Canada on August 19th to acquire the company that operates 86,000 Seven-11 kobini convenience stores.
The Government of Japan has classified Seven & i Holdings as a ‘core enterprise’ significant in national security. According to law in Japan, a national security review is required for any foreign entity to acquire more than one percent of an enterprise owned in Japan. The recent classification of Seven & i Holdings by the Ministry of Finance is based on the extensive operations of a company beyond convenience stores to include financial and securities services.
It is a matter of record that Seven & I has posted a 4 percent return on capital compared to 10 percent for Couche-Tard.
Although the Couche-Tard offer of $38 billion was rejected, the Board indicated that they would consider any subsequent modification and has solicited the advice of Nomura to advise on any transaction. Apart from opposition to the acquisition of the assets in Japan, a take-over of Seven-11 convenience stores and fuel stations would elicit concern by the FTC given the predictable impact on competition.