DALLAS -- It has been 18 years since 7-Eleven Inc. last went from being a publicly traded company to private ownership, and the sting of some of the changes that happened then have franchisees a bit gun-shy as the Dallas-based convenience store company looks at that possibility once again.
For us, it's mixed emotions, Tariq Khan, chairman of the National Coalition of Associations of 7-Eleven Franchisees, told CSP Daily News. Any time a company goes from public to private, you don't know what to expect. We have gone through the same thing [in 1987, and] [image-nocss] it was not a good experience.
As reported in a CSP Daily News Flash yesterday, Seven-Eleven Japan Co. has issued a $1.2-billion cash-tender offer to purchase the 27.3% share of the U.S. company the Tokyo-based retailer doesn't already own. 7-Eleven became a private company in 1991 after going through a leveraged buyout four years earlier.
Khan, who said he has not heard a lot of details about the Japan offer, said he will be watching the path of the transaction cautiously. Although ultimate, he expects the takeover will be approved. It's a very good offer for stockholders, he said. The stock went up today $7.50, so stockholders are likely very excited about it.
If completed, Khan said he expects franchisees will see business proceed as usual at least for a while. We just got a new contract and we are trying to digest the changes that contract brought to us, he said, noting that contract should guide the next few years with few changes.
Meanwhile, Dallas-based 7-Eleven Inc. has appointed a special committee to review the proposal and report back with a recommendation. The expectation is that the official offer will come next Tuesday. Then we have 10 business days to respond, Carol Davidson, vice president of investor relations for 7-Eleven Inc., told CSP Daily News. We would expect that by September 19, [the committee] will have come out with some comment [on the offer].
At that time, the committee, which includes two independent 7-Eleven board members, will advise shareholders as to whether it recommends acceptance or rejection of the tender offer, the company said in a statement. At such time, the special committee will include the reasons for the position taken with respect to the tender offer or its inability to take a position.
Seven-Eleven Japan, which is Japan's largest convenience store operator with more than 10,000 locations, is 51% owned by Japanese retailer and Denny's franchisee Ito-Yokado. The company, which already holds 72.7% of the U.S. 7-Eleven, has offered $32.50 a share in cash for the remaining shares. Davidson said there are about 32 million shares of 7-Eleven Inc. stock. Thus, the offer represents a 15% premium over 7-Eleven's Wednesday closing price of $28.34, according to the Associated Press.
Seven-Eleven Japan said that in order to better compete in the market, 7-Eleven must boost investment in its merchandising, store renovation, distribution and logistics systems, and information systems. The increase in investment, however, is likely to result in lower growth and profitability for 7-Eleven in the short term, the company said. Seven-Eleven Japan also said it expects that taking 7-Eleven private will help achieve a better-governed group structure.
The tender offer will be conditioned upon, among other things, the sale of a majority of the shares not held by Seven-Eleven Japan and its affiliates, and the ownership by Seven-Eleven Japan of at least 90% of the shares on a fully diluted basis. The tender offer is not conditioned upon Seven-Eleven Japan obtaining any financing.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.