The Canadian convenience store giant, Alimentation Couche-Tard, is facing a growing challenge in its pursuit of Japan’s Seven & i Holdings.
The rapid appreciation of the Japanese yen has significantly increased the cost of the acquisition, adding to the already complex deal, Bloomberg reported.
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Since early July this year, the yen has surged by nearly 11% against both the US dollar and the Canadian dollar.
This surge is expected to continue as Japan’s interest rate gap with other countries narrows.
For Couche-Tard, a foreign bidder, this means a more expensive target.
The proposed takeover, which would be the largest foreign acquisition of a Japanese company, has already raised concerns about funding and the potential for government intervention.
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By GlobalDataThe yen’s strength now presents an additional hurdle.
According to Bloomberg, one mergers and acquisitions expert in Tokyo even suggested that the rising yen could give Seven & i the opportunity to make a reverse takeover offer.
This would involve Seven & i acquiring Couche-Tard instead of the other way around.
Couche-Tard has not disclosed the specific terms or price of its offer, but analysts estimate the potential deal value to be around Y9.8trn ($39bn).
This figure is based on a valuation multiple similar to Couche-Tard’s previous acquisition of CST Brands.
As the yen continues to strengthen, the feasibility of Couche-Tard’s bid becomes increasingly uncertain.
The Canadian company will need to carefully assess the potential risks and rewards before proceeding with the acquisition.
Furthermore, a Japanese senior finance ministry official has also clarified that domestic companies cannot use the country’s national security as a pretext to block foreign takeovers.
The statement came amid rumours that convenience store chain 7-Eleven’s owner Seven & i Holdings was pursuing ‘core’ classification under the Foreign Exchange and Foreign Trade Act to avoid the buyout.
