Proxy Advisor Endorses ValueAct Capital's Slate for Seven & i's Board

Institutional Shareholder Services encourages shareholders to vote out five existing directors in favor of four new nominees.
Seven & i & 7-Eleven logos

SAN FRANCISCO — ValueAct Capital is turning up the pressure on Seven & i Holdings.

The global investment firm and activist investor in 7-Eleven Inc.'s parent company announced that Institutional Shareholder Services (ISS), a leading proxy and corporate governance advisory firm, has recommended that shareholders vote against five of Seven & i's board of directors nominees and vote in favor of all four of ValueAct's nominees.

The vote is slated to take place during the 2023 Annual Meeting of Stockholders on May 25.

"We are pleased ISS has recognized that ValueAct's highly qualified nominees are the right choice for the Seven & i Holdings board of directors. A vote for ValueAct's nominees will deliver what shareholders have requested for years — an objective strategic review, a careful president succession process, strengthened governance practices, and the appointment of an independent chair," ValueAct stated.

"We believe Seven & i is at a pivotal point in its evolution, with a clear opportunity to create a global champion 7-Eleven company which will grow and create value for all stakeholders," the investor continued. "We urge shareholders to follow ISS's recommendation by voting AGAINST five of Seven & i's Director Nominees and FOR all four of ValueAct's Director Nominees."

In its recommendation, ISS noted that Seven & i can be seen as a strong Japanese convenience store business that hides several long-term underperforming businesses, with total company returns not matching what could reasonably be expected from a retail brand. It also stated that because the company's strategic plan was designed by insiders and ratified by the full board of directors, leaving execution to the same management under the same corporate culture, investors are left with a lack of reassurance, given Seven & i's long-term track record.

"The company argues that the strength of the Seven-Eleven Japan operation relies on its links with this division's food business… Seven-Eleven Japan is the largest food operation in Japan and three times the size of the superstores business in the food area, so the board's conclusions do not appear intuitive," ISS wrote.

[Read more: 7-Eleven Parent Company Makes Case for Food-Focused Strategy]

ISS also questioned the current board's ability to hold management accountable and instill a sense of urgency into reforms, and speculated on potential red flag's in the company's culture related to weak or unclear reporting lines.

"While the two new company nominees appear to have good credentials, the fact they were vetted by a nomination committee controlled by insiders and long-tenured directors makes it unclear whether they would bring the necessary willingness to challenge the status quo," ISS wrote. "Dissident nominees Rogers, Gill and Natori bring relevant board, capital allocation and executive experience, while Levinson, as a direct representative of the dissident, would provide a shareholder perspective and the link to ValueAct's extensive research capabilities and experience effecting change."

San Francisco-based ValueAct holds that adding its nominees to the board of directors and removing the president and his supporters would allow the board to execute a pro-governance, pro-stakeholder mandate.

Seven & i previously pushed back against ValueAct's nominations, stating that they lack experience in significant business transformation, as Convenience Store News previously reported. It agreed to reappoint most of the current directors, including current Board President Ryuichi Isaka and two other directors that ValueAct wants to replace.

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