7-Eleven No Longer Open to the Public

Seven & I Holdings (Tokyo), a brand new holding company that has instantly become Japan’s largest retail organization, has said it is offering $1 billion to buy the 27 percent of 7-Eleven Inc. (Dallas) that it did not already own.

The deal, one of the biggest investments by a Japanese company in the United States in recent years, would make 7-Eleven a fully owned subsidiary of the Japanese company.

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.

Seven & I is a newly created holding company that began official operations on Thursday. The holding company was formed by the department store chain Ito-Yokado (Tokyo), and also Seven-Eleven Japan Co. Ltd. (Tokyo) and Denny’s Japan Co. Ltd. (Tokyo), the operators of 7-Eleven stores and Denny’s restaurants in Japan. Ito-Yokado (IYG) first bought a controlling stake in 7-Eleven in 1991.

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 on Wednesday.

7-Eleven said that it had appointed a special committee of its board to review the offer and make a recommendation by September 19.

Currently, Seven-Eleven Japan and IYG Holding own a combined 72.7 pct in the U.S. convenience store operator.

The first Seven-Eleven outlet in Japan was opened in Tokyo in 1974 under a licensing accord between the former Southland Corp. and York Seven Co., the predecessor of Seven-Eleven Japan.

Seven & I 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 in a statement. Seven-Eleven Japan also said it expects that taking 7-Eleven private will help achieve a better-governed group structure. The company expects to begin the tender offer, which doesn’t require 7-Eleven board approval, on or about September 6.