Japanese convenience store chain Seven & i, which runs the 7-Eleven chain, continues to defend against a hostile takeover by Canada’s Alimentation Couche-Tard (TSE:ATD).
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Couche-Tard has been trying to acquire Seven & i for several weeks. However, Seven & i remains resistant to the idea and is letting investors know that it can deliver value on its own. Specifically, Seven & i is holding an investor meeting on October 24 that will outline its plan to deliver value to shareholders.
Potential Break-Up
The meeting comes as Couche-Tard gets more aggressive with its buyout offer. According to media reports, Seven & i plans to outline a potential break-up plan that would effectively end Couche-Tard’s $47 billion takeover offer.
Were the deal to go through, it would be the largest foreign buyout of a Japanese firm ever. Couche-Tard already raised its offer once, sweetening the pot by an additional 22%. The proposed restructuring at Seven & i will involve separating the supermarket business and around 30 other units described as “noncore” into a separate holding company.
Growing Concerns
Not everyone is convinced that the Seven & i deal is a good play to begin with. A recent article in The Globe & Mail suggests that Couche-Tard is engaged in a “bet the company” strategy with its acquisition of Seven & i, wondering what happened to the executive team “known for their financial discipline…”
The fact that Couche-Tard will be borrowing most of the $47 billion required to make the deal happen is also raising concerns. This, the report notes, is a far cry from Couche-Tard’s earlier dealings, and it may not be a change for the better.
Is Alimentation Couche-Tard Stock a Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on TSE:ATD stock based on nine Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 2.55% rally in its share price over the past year, the average TSE:ATD price target of C$87.70 per share implies 18.34% upside potential.
