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BFD Expert Voices - Retail Deals

BFD Expert Voices

Seven & i is shedding non-core assets to bolster shareholder value and fend off takeover advances by Alimentation Couche-Tard, which made a $39 billion offer last month. 

Why it matters: The outcome will either indicate the company can stand on its own two feet, or that its convenience store business should fetch a higher valuation. 

"These actions would exhibit Seven & i's commitment to back up its claim in its letter sent to Couche-Tard that its standalone path can realize and unlock shareholder value," according to an analyst note from Jefferies.

Zoom in: The crown jewel is Seven & i's 7-Eleven North America business. "That's the really big moneymaker," and should command a higher premium as a result, says a convenience store banker.

Activist ValueAct Capital has argued that 7-Eleven could be worth more as a standalone company.

"Whatever premium Couche-Tard offered, it's not close to the EBITDA multiples of its North American 7-Eleven business," the banker says.

Catch up quick: In a letter to Couche-Tard rejecting its bid, Seven & i said it could unlock shareholder value "through a number of strategic actions."

But investors like Artisan Partners and Oasis Management have called on the company to engage with Couche-Tard.

Seven & i has approached several private equity funds and other entities for the potential sale of a stake in its supermarket unit, multiple outlets reported last week. 

It is also weighing selling a stake in its banking unit, Seven Bank.

In April, the company said it planned to ready its Ito-Yokado stores and supermarkets for an IPO by 2027.

Between the lines: "Breaking up Seven & i might be a better way for acquirers to see the value of its parts," says the banker. 

"Separate sales of the business makes it more digestible for the Japanese government to weigh in on a specific piece, rather than the whole of the company right now," the banker adds.

What we're watching: There's still room for more potential divestitures. 

The company's non-core assets include restaurant chain Denny's in Japan, Akachan Honpo and the Loft Co.

Context: Seven & i won the approval of the Japanese government to be listed as a "core" designated company, meaning a foreign entity will need to give prior notification of scooping up more than 10% of shares in the company.

The government could go a step further and put Seven & i in the same bucket as a defense contractor or energy company, further entrenching the company from foreign offers.

Couche-Tard and Seven & i didn't respond to a request for comment.

Seven & i charts its course 

Illustration of a dollar sign on a grocery store checkout conveyor belt.

The Duckhorn Portfolio, which owns several high-end wineries, has agreed to be acquired by PE firm Butterfly Equity for $1.95 billion.

Why it's the BFD: The deal injects life into consumer-leveraged buyouts after a sluggish first half.

Shares of the St. Helena, California-based company are up more than 100% during pre-market trading.

Zoom in: Duckhorn shareholders will receive $11.10 per share in cash, more than double the stock's close on Friday at $5.40 per share. 

The deal is not subject to financing conditions and is expected to close this winter.

The agreement includes a 45-day "go-shop" period expiring on Nov. 20, during which Duckhorn advisers can solicit and negotiate alternative acquisition proposals.

Shareholders representing a majority of outstanding voting power have agreed to vote certain shares in favor of the transaction, which Butterfly says is its largest ever.

Committed debt financing will be provided by the Farm Credit System, led by American AgCredit, Compeer Financial, Farm Credit Services of America and Farm Credit Mid-America.

Context: Duckhorn's portfolio of wineries includes Duckhorn Vineyards, Decoy, Sonoma-Cutrer, Kosta Browne, Goldeneye, Paraduxx, Calera, Migration, Postmark, Canvasback and Greenwing. 

Butterfly to acquire Duckhorn winery biz 

Illustration of a one-dollar bill with George Washington holding a glass of red wine.

🤐 Shein's secretive CEO Sky Xu is expected to meet with investors ahead of a London IPO, though the offering is not expected until next year, per the WSJ.

💸 Luxury group Richemont, which owns brands such as Cartier, has agreed to sell its online fashion retail unit Yoox Net-A-Porter to Germany-based rival Mytheresa, per Reuters.

Mytheresa will also absorb Yoox Net-A-Porter's cash of €555 million.

In exchange, Richemont will receive a 33% stake in Mytheresa.

The deal is expected to close in the first half of next year.

🎣 Vista Outdoors has agreed to sell its outdoor goods business Revelyst to Strategic Value Partners for an enterprise value of about $1.1 billion, per an announcement.

The company also plans to sell the Kinetic Group for about $2.2 billion, an increase in the purchase price, to Czechoslovak Group.

☕ Starbucks' biggest problem may be that it's too expensive, according to a survey by Technomic and published by Restaurant Business.

The coffee chain ranked last out of major competitors in the space, with 51% of customers saying they either agreed or strongly agreed that it was affordable.

Tim Hortons ranked first, with 79% of customers saying it was affordable.

Retail therapy

Illustration of a check out screen on a phone with an icon of a shopping cart and a button that says "feel better."

Want more retail deals? Go deeper into our full database in the Axios Pro Deals Tracker.

• Pallet, a transportation and warehouse management system, raised $18m in Series A funding led by Bain Capital Ventures, with participation from Bessemer Venture Partners and Activant Capital. Go deeper

• Marlow, a Toronto menstrual and sexual health startup, raised US$1.9m from Love x Money Ventures, and Dream Ventures. Go deeper

• Homage, a Columbus, Ohio-based vintage-inspired sports and licensed apparel brand, has raised growth funding. Investors include Ryan Reynolds' Maximum Effort, as well as Jason Kelce's Winnie Capital, Rob McElhenney's More Better and The Athletic co-founder Adam Hansmann, among others. Go deeper

• 26North, an investment firm led by Josh Harris, agreed to buy McLean, Va., gym chain Onelife Fitness, which had been backed by Delos Capital and Harris' family office. Go deeper

• MrBeast acquired Vouch, a creator hiring platform that had raised $4m in seed funding from Seven Seven Six, Liquid 2 Ventures, and Shrug Capital. Go deeper

• Watches of Switzerland Group agreed to acquire Hodinkee, a New York-based wristwatch enthusiast site that had raised $46m from TCG, LVMH, True Ventures, Future Shape, GV, Tom Brady, and John Mayer. Go deeper

• QSRP, a restaurant operator and Burger King franchisee, has acquired a majority stake in U.K. pan-Asian noodle chain Chopstix. Go deeper

• Kroger (NYSE: KR) closed the sale of its specialty pharma unit to a subsidiary of Elevance Health (NYSE: ELV). Go deeper

• Willow Lane Acquisition, a consumer goods SPAC led by blank check vet Luke Weil, filed for a $110m IPO. Go deeper

Retail transactions

• Dan Lyons was named VP of sales at Nuqleous, a B2B SaaS provider of data, retail analytics and space planning optimization. nuqleous.com

It's Personnel

🍕 What we're eating: Kim didn't expect to eat good pizza from a truck but she stood corrected when she had a slice (or five) from a wood-fired pizza truck in upstate New York.

✏️ Many thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece for today's edits.

🙏 Thank you for reading Retail Deals. Please ask your colleagues, friends and family to sign up.

October 07, 2024

1 big thing: Seven & i charts its course