Shares of the Japan-based retail holding company and the owner of the 7-Eleven chain, Seven & I Holdings (JP:3382), took a U-turn after Monday’s rally and fell sharply by 10.5% today over antitrust concerns related to the takeover bid from Alimentation Couche-Tard (TSE:ATD). According to the Financial Times, the takeover bid is likely to come under the radar of the U.S. antitrust regulators.
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Seven & I shares jumped over 20% yesterday after the announcement of a takeover offer from its Canadian rival Couche-Tard.
Seven & I Holdings is a retail holding company that oversees various businesses. Meanwhile, Canada-based Alimentation Couche-Tard operates convenience stores, including Circle K.
Antitrust Focus on Seven & I and Couche-Tard Deal
The takeover of Seven & I by Couche-Tard, if completed, could form one of the largest U.S. retail chains. The U.S. antitrust concerns loom over the deal as it could potentially raise consumer prices of beverages and food items. Additionally, this takeover could harm the labor market by reducing job options and employer choices in markets where these two companies compete directly.
The Financial Times reported that if the deal proceeds, both companies may have to provide substantial remedies or divest businesses to gain regulatory approval in the U.S. Apart from the U.S. regulators, the deal is expected to face hurdles in Japan under the Foreign Exchange and Foreign Trade Act.
U.S.’ Tough Antitrust Stance Disrupts Major Mergers
Antitrust regulators in the U.S. have taken a notably aggressive approach under the Biden administration.
Analysts believe the Seven & I and Couche-Tard deal might encounter scrutiny similar to Kroger’s (KR) proposed acquisition of Albertsons (ACI). The deal was announced in 2022 but was put on hold last month due to an antitrust lawsuit. Today, Kroger announced that it has filed a lawsuit against the FTC (Federal Trade Commission), aiming to prevent the regulator from reviewing the deal.
Although Wall Street hopes for lenient antitrust enforcement under a new Harris or Trump administration, both candidates are likely to direct regulators to block deals that could drive up inflation or cut jobs.
Is Seven & I a Good Stock?
As per the consensus among analysts on TipRanks, 3382 stock has been assigned a Hold rating based on one Hold recommendation from analyst Shunsuke Kuriyama from Jefferies. The Seven & I Holdings share price target of ¥2,015.14 is 6.7% lower than the current share price level.
