Bidders poke holes in Japan's fair M&A push
21/10/2024 12:00
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own. Updates to add graphic and hyperlinks.)
By Anshuman Daga
SINGAPORE, Oct 21 (Reuters Breakingviews) - Japan's
Seven & i 3382.T and Fuji Soft 9749.T are each resisting
generous takeover approaches from Canada's Alimentation
Couche-Tard ATD.TO and private equity firm Bain Capital. The
bidders are hitting up against the limits of Tokyo's fair merger
and acquisition guidelines, and that is a problem for
policymakers trying to unlock efficiencies in the $4 trillion
economy.
The guidelines, set out in 2023, ask targets to seriously
consider offers that can deliver shareholder value and are
feasible. Couche-Tard and Bain have presented proposals that
largely fulfil those criteria but both suitors are struggling to
make progress with their desired deals.
Sure, initially playing hard-to-get helped Seven & i.
Couche-Tard this month upped the amount it indicated it can pay
for Seven & i's equity to $47 billion, a 55% premium to the
undisturbed share price. Despite the compelling sum, Couche-Tard
Chair Alain Bouchard told Bloomberg in an interview in Tokyo
last week that he was unable to secure a meeting with the
Japanese retailer's management. Instead, Seven & i is doubling
down on an uninspiring plan to restructure the convenience store
owner.
Meanwhile, a year-long battle between buyout firms to
control Fuji Soft intensified this month. The software firm's
founder Hiroshi Nozawa urged the board to call off support for a
$3.9 billion agreed deal with KKR KKR.N in favour of Bain's 7%
higher offer which is conditional on the board's support. Yet
Fuji Soft's tardiness in warming up to Bain has allowed KKR to
secure a 33% stake in the first phase of a dual-stage tender
offer.
The obvious solution would be for bidders to promptly take
their proposals directly to shareholders. But turning directly
hostile on their targets would risk alienating the Japanese
management of companies, often-lifetime employees, upon whom
they would continue to depend to run the businesses.
Though unsolicited deals are starting to pop up in Japan,
the targets involved remain small and the perceived cultural
barriers are high. If Couche-Tard walks away, as it has done
from other deals, Seven & i stock will crash; scepticism that a
hostile deal will materialise is one reason the stock is trading
17% below the Canadian company's indicative offer.
Japan's fair M&A guidelines are just that, guidelines. Much
like Japan Exchange's attempt to shame listed companies into
disclosing plans to enhance shareholder value, such initiatives
lack teeth. Bidders ought to tread cautiously.
Follow @anshumandaga on X
CONTEXT NEWS
Fuji Soft founder and shareholder Hiroshi Nozawa said in a
letter on Oct. 17 that he supports Bain Capital's takeover
approach for the Japanese software developer.
Bain says it is willing to pay 9,450 yen a share for Fuji
Soft, outbidding the per share value of the target's $3.9
billion agreed deal with KKR by about 7%. Fuji Soft's board has
backed KKR's first phase of its dual-stage tender offer and said
that Bain's potential offer was also under consideration. KKR
has secured a nearly 33% stake in the software firm.
Separately, Alimentation Couche-Tard's Chair Alain Bouchard
on a visit to Tokyo told Bloomberg in an interview on Oct 17
that the Canadian retailer was not granted an audience with the
management of Seven & i. The company has indicated it can pay
$47 billion for the convenience store owner, 55% more than the
7-Eleven owner's undisturbed market capitalisation on Aug. 16.
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Graphic: Seven & i's value shoots up on Couche-Tard's proposal
https://reut.rs/4h6UHL3
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(Editing by Una Galani and Aditya Srivastav)
((For previous columns by the author, Reuters customers can
click on DAGA/
anshuman.daga@thomsonreuters.com))