Alimentation Couche-Tard could bolster its $47 billion (€43.2 billion) offer for Seven & i if the Japanese firm became more cooperative and shared its financial information in greater detail, the founder of the Canadian retailer said.
The comments from Couche-Tard chairperson Alain Bouchard at the first press conference in Japan since his company launched its bid in August mark a change in strategy by the Canadian company in response to what it described as months of stonewalling by the 7-Eleven convenience store owner.
Couche-Tard has received a frosty reception from Seven & i, which has said the deal would face antitrust scrutiny in the United States and last week appointed a new CEO and laid out a restructuring plan as an alternative.
'A Changed Approach'
The Quebec-based Circle-K convenience store owner, which had largely avoided the limelight since launching the bid, showed a changed approach on Thursday as it made its case to a packed hall of about 120 mostly Japanese journalists and an array of film cameras.
"We may be able to enhance our proposal through (due) diligence as we form a greater understanding of the opportunity," Bouchard said. "Unfortunately we haven’t had access to anything."
Seven & i will not consider sharing confidential information with its competitor until Couche-Tard presents a more detailed divestiture plan to meet expected US antitrust concerns that identifies specific stores, a timeframe and a credible buyer, a source familiar with the matter said this week.
On Wednesday, two of Seven & i's independent directors resigned from the board, a development that one shareholder, US-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.
The Canadian firm had 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.
Couche-Tard submitted a yen-denominated bid in January that was largely the same as its earlier dollar-based bid, its CEO Alex Miller said. A successful deal would be the biggest foreign buyout in Japanese history.
Seven & i did not immediately respond to a request for comment.
Japanese Concerns
Originally a US import, 7-Eleven was brought to Japan in 1973 by Seven & i's late founder Masatoshi Ito, who turned it into a popular food destination by serving up fresh sandwiches, rice balls and neat rows of boxed lunches.
When the US owner of 7-Eleven went bankrupt in 1991, the Japanese retailer took over.
Among the Japanese public, there have been concerns that a foreign takeover could lead to a deterioration in the quality of 7-Eleven's beloved products, particularly in fresh food.
In response to a question about potential changes to the sell-by date of rice balls, Miller said Couche-Tard would retain the team in charge of fresh food provision at 7-Eleven stores in Japan.
The convenience store chain also plays a key post-disaster infrastructure role in keeping supplies stocked in far-flung parts of earthquake-prone Japan.
Couche-Tard on Thursday unveiled a website with Japanese and English versions designed to gain the support of Japanese citizens by extolling the benefits of the deal and the Canadian company's experience of keeping its U.S. stores stocked for hurricane relief.
Antitrust Issues
The companies are the top two players in the US convenience store market, with about 20,000 locations between them.
Friction between the parties has centred in recent weeks around potential antitrust barriers in the US even as the two are now working together to sound out potential buyers of stores to be divested to maintain competition.
The cooperation has been constructive so far, but the process was taking too long, Miller said on Thursday.
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 US 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.
