(Bloomberg) — KKR & Co. is considering taking a stake in a proposal by Seven & i Holdings Co.’s founding family to take the Japanese convenience store operator private, people familiar with the matter said, joining fellow private equity giant Apollo Global Management Inc. in the record buyout bid.
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The US firm is discussing investing several hundred billion yen for an equity stake in the operator of 7-Eleven convenience stores, according to the people, who asked not to be identified as the information isn’t public.
KKR’s possible involvement comes on the heels of Apollo weighing a commitment of as much as ¥1.5 trillion to the buyout, and reflects the growing legitimacy of a proposal that began as an effort to fend off Alimentation Couche-Tard Inc.’s interest in the Japanese retailer.
A KKR spokesperson declined to comment.
Led by the Ito family and Itochu Corp., the operator of FamilyMart convenience stores in Japan, the management buyout proposal would involve about ¥4 trillion ($25.7 billion) in equity stakes with the rest to come from bank financing. The original proposal envisioned a valuation of as high as ¥9 trillion for Seven & i — trumping Couche-Tard’s indicated offer of ¥7.5 trillion — though this may be lowered as the company’s market valuation hovers well below either figures.
Seven & i shares closed mostly unchanged on Thursday, after earlier reversing losses and rising as much as 2.1%.
Sumitomo Mitsui Financial Group Inc., Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. are also set to participate in the financing.
Given the scale of financing involved, banks are requesting that investors involved in the negotiations obtain an investment-grade credit rating before they can agree to provide financing, one of the people said. The banks also want the investors to raise a solid amount of equity first to secure the rating.
Apollo is discussing a commitment of as much as ¥1.5 trillion, Bloomberg News first reported last week, while the Ito family is weighing around ¥500 billion and Itochu more than ¥1 trillion. To reach the total of ¥4 trillion in equity stakes that the plan envisions, KKR would need to invest around ¥1 trillion, though other partners may still join the deal.
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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.
–With assistance from Kanoko Matsuyama and Lisa Du.
(Updates with share close in sixth paragraph.)
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