Seven & i Holdings Co. shares failed to erase losses even after the company denied a media report that it was rebuffing a US$47 billion takeover approach by Canada’s Alimentation Couche-Tard Inc.
The operator of 7-Eleven convenience stores is still having constructive discussions with Couche-Tard, the company said in a statement Tuesday. “We will continue to carefully examine all strategic options, including Alimentation Couche-Tard’s proposal, in order to realize value for our shareholders,” the retailer said.
Earlier, the Yomiuri newspaper reported that Seven & i plans to reject the takeover proposal over antitrust concerns in th US. The news dragged the company’s stock lower by as much as 12%, although it recovered in the afternoon to trade down 7.8% after the denial. The stock was already trending lower after a proposed management buyout by the founding Ito family collapsed last week.
“It seems clear now that the rumored new management wants to remain independent and is looking to reject Couche Tard’s bid,” said Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors Pte. “You can already sense the fatigue among those holding the stock.”
Seven & i has declined 19% so far this year, putting its valuation at around ¥5.2 trillion ($35 billion) and close to erasing gains notched since the takeover proposal by Couche-Tard became public in August.
The Seven & i takeover saga is being closely watched as a test case of Japan’s openness to foreign capital, after recent governance reforms made it harder for businesses to ignore overtures that may raise value for shareholders.
Last week, Seven & i disclosed that the heirs of Seven & i founder Masatoshi Ito and Itochu Corp. were unable to arrange financing for a definitive offer to buy the company, which had been designed to fend off Couche-Tard. With the management buyout off the table, Seven & i Chief Executive Officer Ryuichi Isaka was seen to have little choice but to finally enter negotiations with Couche-Tard.
On Monday, the Nikkei newspaper reported Isaka will step down and be replaced by Stephen Dacus, the board member leading the special committee evaluating the proposed buyout by Couche-Tard. Dacus, who worked for decades in the Japanese retail industry, has not yet agreed to share confidential financial information with Couche-Tard that would enable the Canadian retailer to make a firmer offer, people with knowledge of the matter said last week.
Yomiuri had reported earlier Tuesday that the Japanese retailer will seek to boost its valuation on its own after rejecting the approach by Couche-Tard. Seven & i’s denial suggests that some progress may be possible in the future.
Couche-Tard, the owner of the Circle-K chain of convenience stores, is keeping up its pursuit of Seven & i despite not having access to the Japanese company’s finances, people have said.
The continued hope is that Seven & i’s new leadership adheres to the best of governance and let the shareholders decide, said Seth Fischer, chief investment officer and founder of Oasis Management Co.
The best approach here is for the “leadership team to put forward their plan of how they’re gonna grow, how they increase profitability, how the company can enhance value for all shareholders or put forward Couche-Tard’s bid,” Fischer said. “And make sure Couche-Tard has full access” to due diligence so they could put forward a substantial tender offer and let shareholders decide.
With assistance from Alice French and Peter Vercoe.
Kanoko Matsuyama, Bloomberg News
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