Seven & i shares jump 3% on Zabka stake talks in Europe push
Seven & i's Strategic Moves and Market Impact
Stake Acquisition Talks with Zabka
TOKYO, July 17 (Reuters) - Shares in Seven & i rose 3% in Tokyo on Friday as the Japanese retailer said it was in talks to buy a stake in Polish convenience store operator Zabka Group as it seeks new growth drivers following investor pressure over weak earnings.
The 7-Eleven owner is considering acquiring shares in Zabka held by unnamed funds, with the investment likely to total several hundred billion yen, Nikkei reported, which would equate to at least a few billion dollars.
Zabka has a market value of about $8 billion.
Expansion into Eastern Europe
A deal would extend Seven & i's reach into Eastern Europe, beyond its strongholds in Japan and North America, as the retailer seeks to grow its business under CEO Stephen Dacus, who took the helm last year.
"Unlike its previous acquisitions (Zabka) doesn't need to be banged into shape," said Amir Anvarzadeh, a Japan equity market strategist at Asymmetric Advisors.
"Despite this being only a stake purchase for now, it may lead to closer ties down the road," he added.
Market Reactions and Related Movements
Aeon, Japan's largest retailer, also climbed 3% while memory chipmaker Kioxia fell 16%. Warsaw-listed Zabka, which has more than 13,000 stores in Poland and Romania, climbed 11% overnight on the news.
"Amid overall market weakness due to falling semiconductor stocks, defensive sectors centered on domestic demand are being bought," said Naoshi Matsumoto, an analyst at Yamawa Securities.
Seven & i's Global Growth Strategy
In 2021, Seven & i acquired Speedway petrol stations, extending its position in the U.S. It already has outlets in three Nordic countries and has positioned Europe as a "fourth pillar of growth".
It also acquired the 7-Eleven chain in Australia two years ago, moving to cement its control over the brand.
Challenges and Investor Pressure
Seven & i has been struggling to improve its flagging business following a tussle last year with Canadian rival Alimentation Couche-Tard, which had sought to take it over in what would have been Japan's largest-ever foreign buyout.
The retailer has been under pressure from investors due to lacklustre returns and faced calls to focus on its core convenience store business. Last year it agreed to sell off its supermarkets business to private equity firm Bain Capital.
Potential Partnerships and Analyst Insights
SoftBank Corp and mobile payments operator PayPay are in talks to invest several hundred billion yen in Seven & i with Sumitomo Mitsui Card also potentially taking a stake, Bloomberg News reported last week.
A partnership reflects "a history of digital defeat" and amounts to Seven & i "buying takeover defense with shareholders' money," Bernstein analysts wrote in a note.
"Seven is plugging its largest remaining weakness with outside capital and installing friendly shareholders as a takeover countermeasure," the analysts wrote.
SMBC Nikko analyst Kuni Kanamori wrote in a note that Zabka appeared to be a success story. "The question now is what kind of synergies can emerge if this deal comes to fruition," he said.
(Reporting by Sam Nussey, Anton Bridge and Hiroko Hamada; Editing by Kate Mayberry and Jamie Freed)