Alimentation Couche-Tard Inc., a global leader in convenience and mobility, issued a statement in response to a letter sent by the Board of Directors of Seven & i Holdings Co., Ltd. ("7&i") regarding Couche-Tard's proposal.
Couche-Tard has a deep respect for the 7&i businesses operating in Japan and worldwide and has continued to believe that by working together, the two companies can successfully reach and complete a mutually agreeable transaction.
“Our complementary businesses, shared values and excellent strategic fit would allow us to achieve significantly more together than we could individually.”
This includes further expanding the 7-Eleven brand internationally, enhancing relationships with franchisees around the globe and attracting and retaining world-class talent. They can drive growth, learn from each other's operating expertise, benefit from shared best practices, deliver customer excellence and achieve sustainability goals.
The 7&i letter was written by Stephen Dacus, Chair, Special Committee Chairman of the Board, on behalf of the board of directors of Seven & i Holdings Co., Ltd (“7&i”).
Dacus said that the Special Committee, assisted by financial and legal advisors, conducted a careful and comprehensive review of Couche-Tard’s proposal throughout multiple meetings.
The 7&i Board unanimously concluded, based on the unanimous recommendation of the Special Committee, that the proposal was not in the best interest of 7&i shareholders and other stakeholders.
“We are open to engaging in sincere discussions should you put forth a proposal that fully recognises our standalone intrinsic value and addresses our concerns regarding the certainty of closing in the current regulatory environment. However, we do not believe, for several critical reasons, that the proposal you have put forward provides a basis for us to engage in substantive discussions regarding a potential transaction.”
First, the Special Committee believed that the proposal was opportunistically timed and grossly undervalued its standalone path and the additional actionable avenues it see to realise and unlock shareholder value in the near- to medium-term.
Second, the 7&i Board believed that even if Couche-Tard were able to improve the value element of the proposal very significantly, it did not adequately acknowledge the multiple and significant challenges such a transaction would face from U.S. competition law enforcement agencies in the current regulatory environment and provided no certainty to closing.
“Beyond your simple assertion that you do not believe that a combination would unfairly impact the competitive landscape and that you would “consider” potential divestitures, you have provided no indication at all of your views as to the level of divestitures that would be required or how they would be affected,” said Dacus.
“Your proposal also does not indicate, for example, the timeline you believe would be required to clear regulatory hurdles or whether you would be prepared to take all necessary action to obtain regulatory clearance, including by litigating with the government.”
Third, while it acknowledged the crucial role that 7&i plays in everyday life in Japan across food retail, banking and other services, this area would require further discussion.
“As we discussed, although we would have preferred to keep both your proposal and our response private and confidential, given that the fact of your proposal is already in the public domain, in the interest of transparency with our shareholders and other stakeholders, we are making this letter public.”
Given the mutual benefits of a combination, Couche-Tard was disappointed in 7&i's refusal to engage in friendly discussions and requested that advisors engage in discussions with advisors to 7&i, which was rejected.
It also offered to enter into an NDA to enable both sides to share information to find more value, and this request was also rejected. In addition to enabling Couche-Tard to find more value, engagement will enable it to refine our regulatory proposal to sufficiently address deal certainty, as referenced in 7&i's response letter.
Couche-Tard has a successful history and track record of acquisitions and working with U.S. and other regulators in full compliance with applicable processes and requirements. The U.S. convenience store market is highly fragmented, with over 150,000 stores nationally.
Both Couche-Tard's and 7&i's stores operate in the U.S., competing with a wide array of brick-and-mortar and online food and merchandise providers. Additionally, 7&i and Couche-Tard primarily operate in complementary markets across the U.S.
The company also has a solid record of creating value for shareholders and other stakeholders. Couche-Tard has been an extraordinary steward of capital, having solid operating performance and successfully integrating many acquisitions.
At the same time, it also recognises the critical role of 7&i in everyday life in Japan. It has intended to continue to operate the business in a manner consistent with providing this service for local communities.
When entering new markets, Couche-Tard has taken a humble approach and would respect how 7&i operates in Japan.
“We also acknowledge that 7&i plays an important role in Japan's emergency response and is part of the community lifeline and social infrastructure. We are committed to 7&i continuing to serve in this capacity.”
Couche-Tard also has deep experience supporting communities during crises; similar to 7&i, it stays open, provides essentials, and is vital to emergency responses in communities.
“Based on substantial work and preparation, we are confident that we have sufficient capacity to finance the transaction in cash and that financing would not be a condition to closing a transaction.”
Couche-Tard has a solid balance sheet and investment-grade solid credit ratings. It has secured a letter from the financial advisor stating that it was highly confident that it can arrange the financing for the proposed transaction, subject to customary conditions.
“Our acquisition history reflects a high level of discipline and execution excellence on behalf of our stakeholders, and we plan to take the same approach in this situation.”
It remained highly focused on consummating a transaction with 7&i that was in the best interests of all constituencies and was prepared to enter into collaborative and friendly discussions on finding more excellent value for shareholders, providing regulatory certainty and ensuring that the combined entity continued to be the leader and provider of premier offerings.
