NEW YORK — Hedge fund ValueAct Capital is calling on 7-Eleven Inc.'s parent company Seven & i Holdings Co. Ltd. to remove four directors from the Japanese company's 14-member board, citing "a failed corporate strategy."
In a March 24 letter reviewed by Reuters, the investor said it has become frustrated that its engagement with Seven & i over several months had not led to the company adopting a strategy to grow faster and improve profitability and its market valuation. ValueAct argued a "conglomerate discount has persisted" because the management of most of the Seven & i businesses has repeatedly failed in spite of promises for "synergies" and structural reform.
In January, ValueAct, which owns a 4.4 percent stake of Tokyo-based Seven & i, called for shareholders to support a spin-off of the 7-Eleven c-store chain. The activist investor argued that such a separation would boost the company's valuation and corporate governance, and that Seven & i could complete a tax-free spin-off of 7-Eleven through a listing on the Tokyo Stock Exchange in approximately one year, as Convenience Store News previously reported.
In its latest letter, ValueAct did not state how it would seek to oust the four directors, whom it did not publicly identify. The fund nominated four director candidates, who also were not named.
The investor blames the four directors it is now seeking to remove for "governance failures," citing their failure "to disclose a reported acquisition proposal to the company in 2020," failure to conduct an objective succession review, and failure to conduct an independent strategic review in line with governance best practices, according to the letter obtained by Reuters.
In a statement, Seven & i said it had received the letter from ValueAct and that "the board of directors will proceed to scrutinize and consider the contents of the proposal."
Seven & i announced this month it will close an additional 14 Ito-Yokado supermarket stores in Japan, and fully exit its apparel business as part of a structural reform plan.
Six new directors joined Seven & i's board last year, which gained support from ValueAct, according to the news outlet.
ValueAct made an investment in Seven & i in 2021.