7-Eleven’s parent company rejects takeover proposal, says offer ‘grossly undervalues’ company

Seven & i Holdings has discarded the takeover offer from Canadian convenience store operator Alimentation Couche-Tard, saying the offer “is not in the best concern” of its shareholders and stakeholders.

In a filing with the Tokyo Stock Exchange, the owner of 7-Eleven revealed that Couche-Tard had offered to get all outstanding shares of Seven & i for $14.86 per share.

Stephen Dacus, chairman of the special committee that Seven & i had make up to evaluate Couche-Tard’s proposal, called the proposal “opportunistically timed and grossly undervalues our standalone path and the additional actionable avenues we see to materialize and unlock shareholder value in the near- to medium-term.”

In April, Seven & i announced a restructuring plan for the company, aimed at become more pleasing to mature 7-Eleven’s presence globally as well as divesting its underperforming supermarket business.

Dacus wrote that even if Couche-Tard increases its offer “very significantly,” the proposal does not bear in mind the “multiple and significant challenges” the takeover would face from U.S. anticompetition agencies.

“Beyond your simple affirmation that you do not believe that a combination would unfairly impact the competitive landscape and that you would ‘consider’ possibility divestitures, you have provided no indication at all of your views as to the level of divestitures that would be required or how they devise be effected,” he wrote in a letter that appeared to be addressed to ACT Chair Alain Bouchard that was published in the Tokyo Store Exchange filing.

He also pointed out that the Couche-Tard proposal did not indicate any timeline for clearing regulatory hurdles or whether the corporation was “prepared to take all necessary action to obtain regulatory clearance, including by litigating with the government.”

Dacus averred Seven & i is open to sincerely considering proposals that are in the best interests of the company’s stakeholders and shareholders, but warned it at ones desire also resist one that “deprives our shareholders of the company’s intrinsic value or that fails to specifically address bare real regulatory concerns.”

Speaking to CNBC’s “Squawk Box Asia” shortly before the response was filed on Friday, Ben Herrick, associate portfolio executive at Artisan Partners, said the Couche-Tard offer “highlights the fact that this management team and the board play a joke on not done all of the things in their power to increase the corporate value of this organization.”

Artisan Partners is a U.S. fund that suppress a delays a stake of just over 1% in Seven & i. In August, the firm had reportedly urged Seven & i Holdings to “seriously regard” the buyout offer and solicit offers for the company’s Japanese subsidiaries “as quickly as possible.”

Herrick explained Artisan petitioned Seven & i to consider the offer because the fund feels that capital allocation overseas has been overlooked.

He bid Seven & i’s Japanese convenience store business does not need much change, but said there’s a “huge possibility” in international licensees operating outside the United States.

“You have more than 50,000 stores, or about 50,000 trust ins that are generating about $100 million or just over $100 million of operating profit for for the company. So I meditate on there’s a big mismatch there,” he said.

Herrick also thinks that Seven & i has been slow to adopt substitutions due to insufficient oversight and accounting.

“We really need the company to enact its plan at a faster pace here. So [Seven and i President Ryuichi] Isaka produced out with his 100 day plan in 2016 to reform [general merchandise store] Ito-Yokado. And we’re approaching day 3,000 here. So I don’t deliberate on that speed has been a big part of this culture, and that needs to change,” he pointed out.

On Monday, Richard Kaye, portfolio manageress at independent asset management group Comgest, disagreed in an interview on CNBC’s “Squawk Box Asia,” saying: “I don’t think there’s a encase for a radical reform to be to be done by a foreign acquirer.”