Japanese firm offers to buy 7-Eleven shares for $1 billion

Deal would make chain a fully owned subsidiary

September 02, 2005|By NEW YORK TIMES NEWS SERVICE

TOKYO - Japan's largest retailer, Seven & I Holdings, said yesterday that it was offering $1 billion to buy the 27 percent of 7-Eleven, the ubiquitous U.S. convenience store chain, that it does not already own.

The deal is one of the biggest investments by a Japanese company in the United States in recent years, and it would make 7-Eleven a fully owned subsidiary of the Japanese company. 7-Eleven, founded in Dallas 78 years ago, pioneered the concept of small grocery stores offering convenient long hours and grew into the largest such company in the world.

Ito-Yokado, now a unit of Seven & I, first bought a controlling stake in 7-Eleven in 1991, when Japanese companies were gobbling up American companies and properties. The purchase of a household name in American retailing was widely seen as a symbol of Japan's economic rise, and what many thought was America's decline.

Seven & I is a newly created holding company that only began official operations yesterday. The company was formed by the department store chain Ito-Yokado, and Seven-Eleven Japan and Denny's Japan, the operators of 7-Eleven stores and Denny's restaurants in Japan.

Seven & I said on its Web site that it was offering $32.50 for each share of 7-Eleven, about a 15 percent premium over the shares' closing price Wednesday. The announcement sent 7-Eleven shares soaring 22 percent.

In a statement, 7-Eleven said it had appointed a committee of its board to review the offer and make a recommendation by Sept. 19.

Taking full control of 7-Eleven would simplify decision-making for Seven & I by eliminating outside shareholders. In the statement, Seven & I said it wanted to complete the buyout of 7-Eleven, one of its most profitable units, before making new investments in the American company like renovating stores and improving logistics and computer systems.

The statement warned 7-Eleven shareholders that these new investments would hurt the company's growth and profits in the near term, apparently in an effort to encourage them to accept yesterday's offer and sell their shares.

Seven & I joins a small but growing number of Japanese companies that have begun investing in American companies in the last year after an almost 15-year hiatus - a sign that Japan's long economic slump may finally be ending. This time, Japanese buyers are being more cautious and paying more attention to profits than in the free-spending 1980s, lawyers involved in transnational mergers and acquisitions said.

Seven & I is trying to expand its stake in 7-Eleven at a time when it is cutting back elsewhere in the face of rising competition in Japan's crowded retail sector, including from Wal-Mart Stores Inc., which owns a stake in the Japanese grocery store chain Seiyu. On Wednesday, Seven & I said it would close 30 Ito-Yokado stores over the next four years.

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