(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add graphic.)

By Anshuman Daga

SINGAPORE, Oct 9 (Reuters Breakingviews) - Being short of change was never the top hurdle for Alimentation Couche-Tard

to buy Seven & i . Nonetheless, the deep-pocketed Canadian suitor has sweetened its indicative offer, Bloomberg reported on Wednesday citing sources. The $55 billion enterprise value ensures price is not in the way of creating a global convenience store giant.

The operator of the Circle-K gas station chain can probably justify paying the revised amount without destroying value for its own shareholders. The $18.19 per share amounts to a 53% premium to the undisturbed share price on Aug. 16 at current exchange rates, more than double the premium Seven & i said "grossly" undervalued it.

Couche-Tard would need to save nearly $2 billion of annual costs but that looks doable. Assuming a 28% tax rate, the buyer could seal a return that covers its 7.1% cost of capital, Breakingviews calculates using LSEG data. If it saves more, Couche-Tard would still have room to sweeten a deal further.

Either way, the latest indicative price raises the bar for Seven & i's strategic update. CEO Ryuichi Isaka is expected on Thursday to detail plans to unlock shareholder value and report weak earnings: Seven & i's operating profit will fall 9% in the three months ending August from the year-ago period, per analysts forecasts.

Isaka may seek buyers for Seven & i's superstores unit that it pledged in April to float as early as 2026, and for the company's stake in Seven Bank . That would leave Seven & i to focus on its core convenience store business. Still, Isaka's track record of creating value is poor and Couche-Tard's offer is high enough that he ought to engage in talks.

The duo can jointly consider how best to tackle regulatory challenges in the United States where Seven & i is the market leader with a roughly 10% share, followed by Couche-Tard. Those concerns are one reason the target's stock is trading 15% below the latest indicative price but Seven & i can demand a large break fee to compensate for antitrust risks that could lead to an extended deal timeline.

The Japanese company recently secured a special status in Japan as a "core" designated company, complicating any hostile takeover. Couche-Tard, though, is dangling enough money to make a friendly deal possible.

Follow @anshumandaga on X

CONTEXT NEWS

Alimentation Couche-Tard has sent Seven & i a new potential acquisition price of $18.19 per share, Bloomberg reported on Oct. 9 citing people with knowledge of the matter. It added the Canadian company sent the indicative offer to its target on Sept. 19.

At current exchange rates, it amounts to a 53% premium to the company's undisturbed share price on Aug. 16. The previous indicative offer was $14.86 per share. Seven & i stock rose as much as 12% following the Bloomberg report.

Seven & i will seek buyers for a majority stake in its supermarket business, with the process set to start before the end of the year, the Nikkei reported on Oct 4, citing people familiar with the matter.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic: Seven & i stock surges after Couche-Tard ups indicative offer

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

(Editing by Una Galani and Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on anshuman.daga@thomsonreuters.com))