In this briefing:
- 7-Eleven in India: Standard Franchise Model Would Require Minor Tweaks in India
- Nexon Controlling Stake Sale: Names Included in Short List
- Rakuten (4755 JP): Lyft IPO’s Big Lift Unlikely to Lead to a Sustained Re-Rating
1. 7-Eleven in India: Standard Franchise Model Would Require Minor Tweaks in India
- 7-Eleven partners up with Future Retail in an effort to enter the growing Indian Market
- Indian E-Commerce giants pose a significant threat to 7-Eleven’s plans
- 7-Eleven’s recent shift focuses more on developing markets.
- Lack of profitability in India could require changes to the standard franchise agreement in order to attract franchisees
On 28th February 2019, Seven & I Holdings (3382 JP), the operator of the world’s largest convenience store chain 7-Eleven, announced that the company has signed a master franchise agreement with Kishore Biyani’s Future Retail, the operator of the Indian large format store chain Big Bazaar, to expand the 7-Eleven convenience stores into India. Future Retail and Seven & I Holdings expect the first 7-Eleven convenience store in India to be opened in Mumbai in 2019.
2. Nexon Controlling Stake Sale: Names Included in Short List
- Korea’s local news house Hankyung reported the names that should be included in the short list. They are Kakao, MBK Partners (with NetMarble), Tencent, Bain Capital and another foreign PE whose name isn’t disclosed. Apparently, Amazon, Comcast and EA, didn’t make the short list. Those in the short list now get a chance to do due diligence. They will then participate in the main bidding round that is scheduled for early April.
- It is being reported that only Kakao and NetMarble (with MBK Partners) are truly interested in taking over Nexon’s management right. Tencent is expected to join either Kakao or NetMarble-led consortium in the end. Bain is looking into possible investment opportunities that may be created if this sale leads to a mandatory tender offer to Nexon minority shareholders. It seems safe to say that this comes down to a two-horse race: either Kakao or NetMarble.
3. Rakuten (4755 JP): Lyft IPO’s Big Lift Unlikely to Lead to a Sustained Re-Rating
Lyft Inc (0812823D US) has kicked off its IPO by posting its S-1 filing last Friday. Rakuten Inc (4755 JP) is Lyft’s single largest shareholder with a 13.05% stake. Rakuten has invested around $700 million to acquire its current Lyft stake and stands to make 3-4 times its investment if Lyft achieves its rumoured IPO valuation range of $20-25 billion.
Lyft’s IPO valuation range was first reported by Reuters on 20 February 2019. On the back of the news, Rakuten’s shares have so far risen around 10%. Notably, at the IPO valuation range, the Lyft stake would account for 20-25% of Rakuten’s current market cap. While the Lyft IPO will prove to be a big winner for Rakuten from an ROI perspective, we believe that from a valuation perspective, the upside is modest.
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