The battle for control of Seven & i Holdings, which oversees the widely recognized 7-Eleven convenience stores, is heating up as the founding family aims to take the company private through a management buyout amid competitive pressures from foreign acquisition offers. The family has approached Thailand's Charoen Pokphand Group (CP) to secure their investment for this plan, reported national broadcaster NHK on Thursday.
With Canada's Alimentation Couche-Tard attempting to acquire the retail giant with bids exceeding ¥7 trillion (approximately $47 billion), the management buyout proposition offers another defense mechanism. The proposed transaction is estimated at around ¥9 trillion ($58 billion), and if successful, it would mark the largest management buyout in Japanese history.
According to NHK, the investment from CP Group is expected to run to hundreds of billions of yen, as negotiations are still being finalized. A statement from CP All Pcl, the subsidiary of CP Group operating the 7-Eleven stores in Thailand, indicated their commitment to follow prudent investment policies, ensuring any investment maximizes benefits for shareholders and stakeholders.
Despite the potential involvement of CP, analysts at TISCO Securities expressed skepticism about the feasibility of the investment citing limited synergy benefits between the conglomerate’s operations and Seven & i. Following the report on the takeover discussions, shares of CP All saw nearly 8% drop on the Thai stock exchange.
The family’s management buyout strategy includes retaining current management to help stabilize operations and address mounting pressures to divest underperforming assets. Investors have increasingly urged Seven & i to streamline its business model, which encompasses supermarkets, specialty stores, and restaurant franchises.
This latest move follows the establishment of a holding company to manage 31 subsidiaries, indicating internal restructuring efforts. Meanwhile, sources revealed private equity giants KKR and Bain Capital each put forth bids exceeding $5 billion for the spinout of Seven & i’s non-core assets.
The urgency for the buyout plan arises as Seven & i has faced declining sales. Revenue dropped 4% year-on-year, with same-store sales falling 0.6% for two consecutive months amid rising operational challenges. These figures reflect difficult trading conditions, particularly influenced by inflationary pressures within the U.S. market where profits fell by 80% year-on-year.
Even as international sales soared by 70%, reflecting some market resilience, the company is wrestling with the need to adapt to changing consumer behaviors and economic circumstances. To address these shifts, Seven & i has embarked on transformative operational strategies such as introducing cashier-less stores and adjusting store location strategies, catering to Japan's aging population.
The interest from Couche-Tard first emerged last year, alarming Japanese stakeholders accustomed to major corporations being acquirers rather than targets of foreign takeovers. This was seen as particularly unconventional, not least because of the scale of the proposed acquisition. On August 19, 2024, Seven & i acknowledged the bid from Couche-Tard, venturing to highlight the historic nature of such international collation, with combined sales potentially exceeding ¥20 trillion ($129.3 billion).
Analysts suggest this proposed takeover is part of Couche-Tard's longstanding strategy of seizing market opportunities following earlier attempts to acquire Seven & i and engage, albeit unsuccessfully, with competitors like Speedway.
On the Thai side, CP Group’s Dhanin Chearavanont played a pivotal role over three decades ago by successfully negotiating the operational rights to introduce 7-Eleven stores to Thailand, turning them from unprofitable ventures to successful retail establishments. This history of adaptability and strategic initiative is what fuels hopes for CP’s involvement today, combining local market knowledge and extensive operational experience to offer insights for handling potential management changes.
Given the retail climate's fluctuations and the mounting competitive pressures internally and externally, the proposed buyout by Seven & i's founding family signals not just tactical maneuvering but also their commitment to reasserting control over their corporate destiny. The stakes are high, reflecting broader trends of corporate restructurings and cross-border acquisitions, which may redefine the future of retail operations across Asia.
Regardless of the outcome, this conflict will undeniably shape the course of Seven & i Holdings' legacy and impact its strategic path forward amid urgent investor demands and external challenges.