Alimentation Couche-Tard Inc is discussing improving its takeover proposal for Seven & i Holdings Co, Ltd, with the goal of convincing the Japanese convenience store operator to start engaging in discussions, people with knowledge of the matter said. 

Couche-Tard has been weighing how much it would be able to increase the potential offer, the people said, asking not to be identified because the information is private. Shares in Seven & i rose as much as 7.3% in late morning trading in Tokyo on Thursday. 

A bid would need to be significantly higher than the initial proposal of US$14.86 per share, in order to get Seven & i to enter negotiations, according to the people.

When Seven & i rejected Couche-Tard’s US$39 billion buyout approach last week, the Japanese company said in a letter that it would be willing to engage in “sincere discussions”, with a proposal that recognises its value and addresses anti-competition concerns that would need to be resolved for any potential deal to go forward. 

A representative for Couche-Tard reiterated the retailer’s previous statement that they are highly confident that collaborative discussions could lead to ways to increase value for Seven & i shareholders, declining to comment further.

The Canadian suitor faces an uphill battle, however. The current price gap between the two sides may be so wide that the chances of a deal being reached are significantly diminished, according to the people. 

Couche-Tard is still debating its next steps and there’s no certainty that it will decide to submit another proposal to Seven & i, the people said. Couche-Tard said this week that it wants to work together with the 7-Eleven operator to agree on a friendly takeover. 

Seth Fischer, chief investment officer at Seven & i shareholder Oasis Management, said earlier on Thursday on Bloomberg Television that he’s “disappointed” that the Japanese retailer rejected Couche-Tard’s acquisition proposal.

“Couche-Tard has put forward a very serious proposal to the company, and I am a little bit disappointed with the company’s reaction,” Fischer said.

  - Bloomberg