Apollo Global Management (APO) is reportedly exploring a substantial stake in the Japanese convenience store operator, Seven & i (SVNDY), according to Bloomberg. This is part of a move by Seven & i’s founding Ito family to take the Japanese store operator private. The report stated that the U.S. private equity giant is contemplating an equity stake of up to ¥1.5 trillion ($9.5 billion).
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What Is APO’s Proposed Plan?
Under the proposed plan, Apollo would be a key investor in Seven & i with the Ito family and Itochu Corp., the operator of FamilyMart stores in Japan. The Ito family is considering a ¥500 billion contribution, while Itochu may commit over ¥1 trillion. Combined, these equity stakes could reach ¥4 trillion, although Apollo may not gain majority control, as the exact terms are still under discussion. The remainder of the financing is expected to come from Japan’s leading banks.
Initially valued at ¥9 trillion, the buyout bid dwarfs Alimentation Couche-Tard’s (TSX:ATD) ¥7.5 trillion offer last year. However, the valuation might be revised downward since Seven & i’s current market cap hovers around ¥6.5 trillion after a recent dip in its stock price following disappointing earnings.
Seven & i’s Founding Family Intends to Retain Control
This bid, driven by the Ito family, is more than just a financial maneuver; it represents a strategic effort to keep Seven & i under Japanese control. Meanwhile, Seven & i has announced a radical restructuring plan to separate the company’s thriving convenience store division from its struggling retail operations, aiming to unlock greater value.
Considering these takeover proposals, Seven & i’s management remains undecided, with its special committee evaluating proposals from both Couche-Tard and the Ito family. Seven & i’s CFO Yoshimichi Maruyama commented, “We are considering all options, and whether they are feasible. Both proposals have hurdles to make an acquisition possible.” The company aims to finalize its decision ahead of its shareholders’ meeting in May, prioritizing options that best serve its stakeholders.
Is APO a Good Stock to Buy?
Analysts remain cautiously optimistic about APO stock, with a Moderate Buy consensus rating based on 13 Buys and five Holds. Over the past year, APO has surged by more than 65%, and the average APO price target of $182.13 implies an upside potential of 12.4% from current levels.
