(Feb 6): The consortium proposing to take Seven & i Holdings Co private has tapped Citigroup Inc and Bank of America Corp (BofA) for financing, adding to a growing group of players in the potentially record-breaking management buyout bid, people familiar with the matter said.

The two US banks’ role in the bid would be to refinance the debt of Seven & i’s US unit, one of the people said. The company had debt of ¥2.7 trillion (US$17.8 billion or RM78.43 billion) as of November, 56% of which belonged to the overseas convenience store operations, according to the company’s financial results. Banks typically pass on such debt to outside investors.

Thai conglomerate CP All plc — which holds the Thai franchise for 7-Eleven — is also weighing plans to take an equity stake in the management buyout of about ¥500 billion, the people said, joining a plan hatched by Seven & i’s founding Ito family and Familymart-operator Itochu Corp last year. 

CP All shares extend their declines on Thursday, falling as much as 5%. Any CP All participation in the deal would lead to higher interest expenses, hindering the company’s profit growth, Asia Plus Securities Pcl said in a note this week.

The entities would be some of the final parts of a plan hastily cobbled together to fend off Canadian retailer Alimentation Couche-Tard Inc, whose overtures to Seven & i were made public last August.

Representatives of Citigroup, BofA and CP All did not immediately respond to requests for comment. 

The Ito family and Itochu originally planned a buyout effort valued at ¥9 trillion — trumping the ¥7.5 trillion Couche-Tard takeover bid. This may be lowered as the company’s current valuation hovers well below either figure. Seven & i’s market capitalisation was around ¥6.2 trillion as of Thursday. 

A successful bid would not just allow one of the country’s biggest retailers to restructure in private, but represent a successful group effort from corporate Japan to keep the storied brand out of foreign hands. 

The management buyout proposal would involve about ¥4 trillion in equity stakes with the Ito family contributing around ¥500 billion and Itochu more than ¥1 trillion. The rest would come from bank financing. 

Apollo Global Management Inc is discussing a commitment of as much as ¥1.5 trillion, while KKR & Co is also considering a stake, Bloomberg News reported earlier. 

Sumitomo Mitsui Financial Group Inc, Mitsubishi UFJ Financial Group Inc, and Mizuho Financial Group Inc are set to participate in financing. 

Uploaded by Tham Yek Lee