Scuttled Seven-Eleven Deal offers lessons in takeovers

Convenience store giant Alimentation Couche-Tard was pushing to acquire Japan-based Seven & i Holdings, owner of the ubiquitous Seven-Eleven convenience stores. However, the Canadian company withdrew its takeover offer on July 16.

Couche-Tard cited a "lack of constructive discussions" as the reason for withdrawing its bid. It also criticized management at Seven & i Holdings for an inadequate response to its earlier offer. But, it also denied there is any possibility of it launching a hostile takeover bid.

Seven & i Holdings will now be free to pursue its own independent course. However, the company's shares have yet to surpass the price level they held on the day before Couche-Tard withdrew its takeover bid. This could indicate that the market is skeptical of Seven & i's ability to achieve growth on its own. The company now needs to demonstrate a compelling strategy for adding value.

Couche-Tard's takeover bid became public knowledge in August 2024. Subsequently, the Canadian company boosted its offer to ¥7 trillion JPY ($46 billion USD at the time). Due to the weak yen, foreign companies appeared eager to acquire Japanese companies. Couche-Tard's takeover attempt became a symbolic example of this trend.

Although the takeover bid for Seven & i Holdings has been withdrawn, Japanese company executives should recognize that the basic situation has not changed. Companies that have growth potential but are unable to increase their corporate value are at risk of being acquired and should be managed with a sense of crisis.

In order to avoid being bought up, such businesses need to pursue structural reforms and improve their market valuation. Gradually, the longstanding tendency for companies to engage in crossholding shares with other companies to strengthen relationships with business partners is being eliminated.

Japanese companies should instead realize that the best takeover defense is to improve profitability and raise their share prices.

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