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05/06/2022

Investor Urges 7-Eleven Parent Company to Focus on C-store Chain

ValueAct Capital supports Seven & i Holdings' decision to shake up its board of directors.
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logo for Seven & i Holdings Inc.

TOKYO — An activist investor group is giving the thumb's up to Seven & i Holdings slate of candidates for its board of directors, while continuing its push to highlight the 7-Eleven convenience store chain.

Tokyo-based Seven & i Holdings is the parent company of 7-Eleven Inc. Last month, it decided to make changes to its board following a call from San Francisco-based ValueAct Capital to restructure the company.

According to Seven & i Holdings, the changes followed "constructive discussions with domestic and overseas institutional investors and shareholders in order to globalize its businesses and implement reforms in consideration of the voices from capital markets, as Convenience Store News previously reported.

In light of the changes, ValueAct Capital told its shareholders it was supporting the Seven & i Holdings' new director candidates for the board, Reuters reported.

ValueAct Capital also urged the company to focus more on the 7-Eleven chain while applauding its moves to overhaul governance and strategy, the news outlet added.

Seven & i Holdings Changes

In early April, Seven & i Holdings decided to shake up its board of directors. Specifically, the company said:

  • A majority of the board of directors will be independent outside directors in order to ensure the effectiveness of its supervisory function.
  • Five candidates (two female and three non-Japanese nominees) will be nominated to newly assume the office of independent outside directors. This will result in a total of eight independent outside directors, including re-appointees.
  • Internal directors will be reduced by two to a total of six to strike a balance between business management and supervisory function.

In addition, the company said it will continue reforms of its business portfolio, and it had hired a financial adviser to conduct a strategic review of its Sogo & Seibu department store unit.

According to the Reuters report, ValueAct applauded the company for the strategic review Sogo & Seibu, which suggests more focus will be placed on 7-Eleven.

The Irving, Texas-based retailer operates, franchises and/or licenses more than 13,000 stores in the United States and Canada. In addition to 7‑Eleven c-stores, the company operates and franchises Speedway, Stripes, Laredo Taco Co. and Raise the Roost Chicken and Biscuits locations.

ValueAct also applauded Seven & i Holdings' plans to add six newcomers to its board of directors.

"The new board can be more objective and discerning in evaluating the company's current strategy, structure, organizational issues, and execution," ValueAct wrote in an email to its shareholders.

ValueAct Capital's Stake

ValueAct Capital took a 4.4-percent stake in Seven & i Holdings last spring.

In a May 2021 letter to investors, ValueAct Capital said the 7-Eleven business could be worth more than double what its parent is currently valued at if the company restructures itself to focus on the convenience stores or if 7-Eleven is spun off.

In February, ValueAct followed up the push with a four-step strategic transformation plan for Seven & I. The plan called for:

  • A bold strategy to focus on 7-Eleven and to restructure the non-core businesses without limits.
  • Completing the sale of Sogo & Seibu and announce intention to separate Ito-Yokado through a sale or spin-off with plans to rapidly restructure the company to focus on its food retail operations.
  • Exiting the remaining non-core businesses while maximizing value and paying due consideration to stakeholders until the convenience store operations are all that remain.
  • An operational review of 7-Eleven outside of Japan, including the U.S. expense base and fresh food opportunity, as well as the international growth opportunity, culminating in new targets and a roadmap to achieve them.