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CONSUMER STAPLES: Alimentation Couche-Tard (Baa1/BBB+) ATD comes back on price

CONSUMER STAPLES
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o/n reports are ATD came back with a higher offer. FT is reporting it is at $47b - we assume its referencing the equity value and if so eqv. to $18/share or a EV of $65b at 9x multiple. Reminder comments imply ATD will attempt to keep ratings unchanged - indicative of sizeable help from equities. We see full debt funding moving leverage from net 2.1x to 5.8x now. 50% funding would move it to 4.0x. Either outcome should see multi-tranche supply across €/$/CAD - and regardless of if this deal closes co has tagged $10b to M&A (cash short-fall of $8.4b). It is a seasoned M&A operator with results to show.

  • Revised offer is up +21% from previous which was at $14.86/share (~¥2121 at the time) in cash - a circa 20-30% premium that we saw valuing the business at ~7.8x multiple vs. ATD's 12x.
  • Seven and I confirmed it received a revised offer but has kept the details to itself, Equities +5% in Tokyo trading at a market cap of $40.9b (EV of $59.7b) and now +33% from first leaks in mid-August.
  • Reminder Seven and i has been playing defence; it successfully got itself upgraded from non-core to 'core' status under the Foreign Exchange and Foreign Trade Act - the Japanese finance minister was quick to play it down as a hurdle. More recently it has been rumoured to be considering asset sales; the supermarket chain Ito-Yokado and Seven Bank stake. The read-through on the latter has been a) either boosting the effective price of ATD's offer for the remain-co or b) quietening investor complaints by funding shareholder pay-outs.
  • White Knights in the form of Japanese PE firms are reportedly lining up as well - 4 confirmed to the FT that they wrote to Seven and I.
  • FTC has begun a pre-emptive investigation - a highly fragmented market may help #1 (7-11) and #2 (ATD) merge with estimated US market share of each only in the mid-to high single digits.

Seven and i reports it's qtrly results (to August) tomorrow. Any large misses may continue to enflame current shareholders and credit negative for us staring down sizeable supply to fund this deal. The litmus test for revised Japanese M&A guidelines is also getting a global spotlight thanks to ATD.

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o/n reports are ATD came back with a higher offer. FT is reporting it is at $47b - we assume its referencing the equity value and if so eqv. to $18/share or a EV of $65b at 9x multiple. Reminder comments imply ATD will attempt to keep ratings unchanged - indicative of sizeable help from equities. We see full debt funding moving leverage from net 2.1x to 5.8x now. 50% funding would move it to 4.0x. Either outcome should see multi-tranche supply across €/$/CAD - and regardless of if this deal closes co has tagged $10b to M&A (cash short-fall of $8.4b). It is a seasoned M&A operator with results to show.

  • Revised offer is up +21% from previous which was at $14.86/share (~¥2121 at the time) in cash - a circa 20-30% premium that we saw valuing the business at ~7.8x multiple vs. ATD's 12x.
  • Seven and I confirmed it received a revised offer but has kept the details to itself, Equities +5% in Tokyo trading at a market cap of $40.9b (EV of $59.7b) and now +33% from first leaks in mid-August.
  • Reminder Seven and i has been playing defence; it successfully got itself upgraded from non-core to 'core' status under the Foreign Exchange and Foreign Trade Act - the Japanese finance minister was quick to play it down as a hurdle. More recently it has been rumoured to be considering asset sales; the supermarket chain Ito-Yokado and Seven Bank stake. The read-through on the latter has been a) either boosting the effective price of ATD's offer for the remain-co or b) quietening investor complaints by funding shareholder pay-outs.
  • White Knights in the form of Japanese PE firms are reportedly lining up as well - 4 confirmed to the FT that they wrote to Seven and I.
  • FTC has begun a pre-emptive investigation - a highly fragmented market may help #1 (7-11) and #2 (ATD) merge with estimated US market share of each only in the mid-to high single digits.

Seven and i reports it's qtrly results (to August) tomorrow. Any large misses may continue to enflame current shareholders and credit negative for us staring down sizeable supply to fund this deal. The litmus test for revised Japanese M&A guidelines is also getting a global spotlight thanks to ATD.