TOKYO, Sept 17 (Askume) – Japan’s finance minister said on Tuesday that labelling 7-Eleven’s parent company as “key” to Japan’s national security would not hinder a potential takeover, comments aimed at easing investors’ concerns about the move.
QEE Holdings (3382.T) joins the list of 88 companies banned by the government due to national security concerns“We cannot say that the main classification makes purchasing more difficult,” Suzuki told reporters a few days later.
The shift has led some market participants to speculate that Seven & I, previously designated as “non-core,” is trying to better protect itself from a potential takeover by Canada’s Alimentation Couche-Tard. (ATD.TO)
This month, Seven and IRejected Circle K owner Couche-Tard’s $38.5 billion offer, citing pricing concerns.
The potential deal is being closely watched not only for its impact on the retail industry but also for further clues about the direction of Japan’s administrative reforms – which would create a global convenience store giant.
The benchmark Nikkei average (.N225) has hit several record highs this year, a feat that once seemed impossible, as foreign investors look for meaningful regime change.
Any sign of protectionism, such as blocking foreign acquisitions on less than credible grounds, could dampen enthusiasm for stocks and M&A, market participants said.
“In theory, Seven&I’s reclassification into core industries should not change the outcome of the deal,” Jefferies analysts said in a note on Tuesday. “This is a litmus test for the government’s determination to enhance corporate/shareholder value through a fair M&A market.”
Self-report
It’s unclear what part of Seven & Me’s vast business justified the change. The group operates a security company and a bank, both seen as more important to Japan’s security than its vast network of 7-Eleven stores or Denny’s family restaurants.
Treasury officials repeatedly said at Friday’s press conference that national security classifications included on the list are largely self-reported by companies, rather than the government recognizing classifications included on a “core” list as national security.
Whether businesses falling under the “core” category are critical or not will be determined during the actual review, he said.
“Japanese companies have not been attractive targets for a long time, so such takeover proposals are welcome, especially as Japan is keen to expand foreign direct investment,” a senior government official told Askume.
“The acquisition of Couche-Tard will enhance Japan’s market reputation,” the official said.
When a company is classified as a core company, foreign entities wishing to purchase 1% or more of a Japanese company must apply to the Japanese government for a national security review before they can in principle purchase it.
Suzuki, however, said that prior notice of review is required in cases where control is sought, “regardless of whether they fall into the core or non-core categories.”
