(Bloomberg) — Apollo Global Management Inc. is considering taking a substantial stake in a bid by Seven & i’s founding Ito family to take the Japanese convenience store operator private, people familiar with the matter said.
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The US private equity giant is discussing a commitment of as much as ¥1.5 trillion ($9.5 billion) for an equity stake in the plan, said the people, who asked not to be identified as the information isn’t public.
Under the current proposal, which is subject to change, Apollo would join the Ito family and Itochu Corp., the operator of FamilyMarts in Japan, as key investors. The Ito family is weighing a commitment of around ¥500 billion and Itochu of over ¥1 trillion. Other partners are still negotiating stakes.
The present proposal sees equity stakes making up about ¥4 trillion, with the rest of the financing coming from the banks, the people said.
The valuation of the buyout effort was originally planned for ¥9 trillion — trumping the ¥7.5 trillion takeover bid from Alimentation Couche-Tard Inc. — but may be lowered as the Japanese company’s market value remains well below the proposals, the people said. Seven & i’s market valuation on Friday hovered around ¥6.3 trillion after stocks dipped over third quarter earnings.
A representative for Apollo declined to comment.
Details of the deal, such as the investment structure, the ratio of voting rights and the composition of the board members, are still being negotiated, the people said.
The management buyout consortium is racing to finalize a proposal ahead of Couche-Tard, whose unsolicited interest in Seven & i set off a frenzy at the staid Japanese retail giant last year. Besides the take-private plan, Seven & i has also announced a radical restructuring to separate its convenience store business from the weaker retail operations, pledging to raise the value of the former.
The Ito family-led bid would be among the biggest buyouts on record, and reflect a successful unified effort by corporate Japan to keep one of the country’s most famous companies from falling into foreign hands.
On Thursday, Seven & i’s Chief Financial Officer Yoshimichi Maruyama said that a special committee of the company’s board is still considering takeover proposals by Couche-Tard and Ito family, although it doesn’t have enough information to evaluate them.
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“We are considering all options, and whether they are feasible,” Maruyama said. “Both proposals have hurdles to make an acquisition possible. We haven’t received details of those solutions, so the ball is on the side of those proposing buyouts.”
Seven & i management will decide what the best course of action will be, with an eye toward the shareholders’ meeting in May, he said.
–With assistance from Kanoko Matsuyama and Bei Hu.
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