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TOKYO -- Shares of convenience-store chain 7-Eleven, Inc. soared 22 percent yesterday after Seven-Eleven Japan Co., Ltd. here said it intends to buy outstanding shares of 7-Eleven to help strengthen the U.S. chain’s operations. The $1.02 billion deal would be made through Seven-Eleven Japan's wholly owned subsidiary, IYG Holding Company.
Seven-Eleven Japan (SEJ) currently owns 72.7 percent of the outstanding common stock of the U.S. chain, and intends to offer to acquire the balance of common stock at a price of $32.50 per share in cash, representing a 15 percent premium over the closing price for 7-Eleven's shares on Aug. 31.
The Japanese company said the buyout is necessary to "maintain 7-Eleven's growth and to allow [it] to compete effectively in the increasingly competitive convenience store and retail industry over the long term." SEJ said the U.S. operation must increase its investment in merchandising, store renovation, distribution and logistics, and information systems.
SEJ said its offer provides 7-Eleven's minority investors an opportunity to avoid risks relating to lower short-term growth and profitability that would result from these needed investments; and that taking the chain private will also help to achieve a better-governed group structure.
The offer will be conditioned upon, among other things, the tender of a majority of the shares of 7-Eleven common stock not held by SEJ and its affiliates and, unless waived, the ownership by SEJ of at least 90 percent of the outstanding 7-Eleven common stock on a fully diluted basis. The tender will not be conditioned on SEJ obtaining any financing. Any shares not acquired in the tender offer are expected to be acquired in a subsequent "short form" merger transaction at the same per share cash price offered in the tender offer.
7-Eleven's board formed a special committee to review and respond to the offer. The committee plans to advise shareholders by Sept. 19.