(Bloomberg) -- The takeover battle for Seven & i Holdings Co. is fueling share gains in its banking unit, on speculation the Japanese retail giant will cut its stake and allow the lender to conduct buybacks more freely.
Seven Bank Ltd. has risen about 16% since Aug. 16, just before a takeover proposal for Seven & i by Alimentation Couche-Tard Inc. became public, by far outperforming all other lenders in the Topix index.
Expectations for share buybacks “may increase significantly” if Seven & i cuts its consolidated holdings from the current 46.4%, said Maoki Matsuno, an analyst at Mizuho Securities Co. in Tokyo.
It’s been difficult for Seven Bank to repurchase shares as that would concentrate Seven & i’s ownership and risk the parent firm being classified as a bank holding company, subjecting it to tighter regulations, according to Matsuno. If Seven & i reduces its stake, the lender will have more leeway.
A representative for Seven Bank said the company considers share buybacks as a future option, but that its shareholder returns are sufficient at the moment.
Seven & i is exploring the sale of part of its stake in Seven Bank, people with knowledge of the matter said earlier this month. The move is intended to show the retailer, which has rejected Couche-Tard’s initial proposal, is willing to focus more on its core 7-Eleven business, said the people.
Seven & I Should Ditch Units to Defend Buyout Bid, Academic Says
While speculation around more buybacks may be enticing stock investors, S&P Global Ratings warned this week that reduced stake by Seven & i would pressure the bank’s creditworthiness by eroding support from the group. Until Couche-Tard’s offer came to light, Seven Bank shares had been underperforming its peers since the Aug. 5 market-wide meltdown.
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