(Bloomberg) -- Itochu Corp. is seeking to take full control of convenience-store chain FamilyMart Co. through a tender offer valued at as much as 580.9 billion yen ($5.4 billion).
The Japanese trading company, which already owns 50.1% of FamilyMart, is offering 2,300 yen apiece for the shares it doesn’t already own, it said in a statement Wednesday. The offer represents a premium of 31% over Wednesday’s closing price of 1,754 yen a share.
FamilyMart shares settled 23% higher at the close of trading in Tokyo on Thursday, their biggest gain ever. The stock didn’t trade during the day, as buy orders far outnumbered those to sell. FamilyMart’s stock was down about a third for the year before Itochu’s announcement Wednesday.
FamilyMart directors said they support the tender offer, and that shareholders should make their own decision. FamilyMart executives said in a conference call that Itochu approached them in February. They had originally intended to discuss the matter with Itochu after the coronavirus pandemic died down as they initially expected the impact to be short.
Japan’s trading companies have been increasing their stakes in the country’s biggest convenience store operators as a way to diversify business away from the volatile commodities business. In 2016, Mitsubishi Corp. paid 144 billion yen to purchase a controlling stake in Lawson Inc.
The convenience store market in Japan is saturated and dominated by three majors -- 7-Eleven, FamilyMart and Lawson, making business fiercely competitive. FamilyMart is the country’s second-largest convenience store franchiser, with more than 15,000 locations.
Both companies thought combining resources would help FamilyMart move more quickly to meet challenges as it pursues digitalization, a payments business and overseas expansion, said President Takashi Sawada in a call with reporters Wednesday for the company’s quarterly earnings.
“We want to use Itochu to solve our problems,” he added.
If the tender offer, which runs from July 9 to Aug. 24, is successful, FamilyMart would become a wholly owned subsidiary of Itochu. In 2018, Itochu paid a much higher price -- 11,000 yen per share -- to boost its stake to 50.1% from about 40.7%.
Jefferies analyst Michael Allen suggested Itochu may be trying to avoid writing down the value of its previous stake purchase of FamilyMart. “They’re getting a better price now than they got before, so that’s why it makes sense to them,” he said.
(Updates with share move in third paragraph)
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