The authors are Reuters Breakingviews columnists. The opinions expressed are their own.
By Anshuman Daga and Una Galani
SINGAPORE, Nov 21 (Reuters Breakingviews) - The founding family of Japan's Seven & i 3382.T has found a strange ally. The Ito clan proposed a non-binding buyout of the convenience store operator that could be worth $58 billion. Its bid depends partly on Itochu 8001.T, owner of rival store FamilyMart.
The $71 billion trading house will join a consortium that would contribute 3 trillion yen - around $20 billion - in cash and equity towards a deal, Bloomberg reported citing sources. That would reduce the debt financing required to rival an approach from Canada's Alimentation Couche-Tard ATD.TO.
Itochu, whose businesses span textiles, energy and chemicals, may seek to build on existing ties it has to 7-Eleven via its wholesale food division. Such a defence would not be unheard of in Japan Inc: crisis-hit Toshiba, for instance, was acquired in 2023 by a local buyout firm that pooled equity from some 20 companies, many of which had business relationships with the conglomerate.
The financial outlay looks manageable; Itochu's net debt is 2.3 times forecast fiscal year 2025 EBITDA, the lowest among its four big rivals, per LSEG. It also trades on a richer valuation multiple than Sumitomo 8316.T and Marubeni 8002.T. Meanwhile, its total return to shareholders of 30% over the past year makes it the best performer in the group.
Combined, though, 7-Eleven and FamilyMart would have 70% market share of Japan's convenience stores. That's probably too high. Indeed, part of Seven & i's unofficial defence relies on the status of convenience chains as first providers of key services to citizens when disasters like earthquakes strike. Reducing the number of large store operators from three to two may undercut that role.
A less contentious plan could see FamilyMart and 7-Eleven integrate logistics services. That would reduce the need for the duo to each have their own delivery drivers. Their outlets often sit side-by-side, and Japan's aging society has a serious shortage of workers.
Itochu might be able to avoid antitrust issues by initially limiting itself to a small slug of Seven & i's equity, say less than 20%. Ultimately, the trading house's acceptability in any deal may boil down to what Japan's policymakers desire more: competition or workforce efficiency.
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CONTEXT NEWS
Japan's Seven & i said on Nov. 13 it received a non-binding buyout proposal from its founding Ito family. The offer could be worth about 9 trillion yen ($58 billion), Bloomberg reported on the same day, citing sources.
Trading house Itochu will join the founding family's proposal that will include other investors and Japan's biggest three banks, the sources said. Itochu owns FamilyMart, the country's second-biggest convenience store chain.
(Editing by Robyn Mak and Ujjaini Dutta)
((For previous columns by the authors, Reuters customers can click on DAGA/ GALANI/anshuman.daga@thomsonreuters.com una.galani@thomsonreuters.com))
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