Mergers & Acquisitions

Another Advisory Firm Backs ValueAct’s Seven & i Play

Joining ISS, Glass Lewis supports changes at 7-Eleven parent
Photograph: Shutterstock

Seven & i investor ValueAct Capital is gaining additional support in its campaign to get the Tokyo-based retail company to spin off the 7-Eleven convenience-store chain.

Ahead of 7-Eleven Inc. parent Seven & i Holdings Co. Ltd.’s May 25 annual meeting of shareholders, Glass Lewis, a major governance solutions and proxy vote management firm, is supporting investor ValueAct’s efforts to bring a change of strategy and leadership to the convenience-store company. It joins Institutional Shareholder Services (ISS), another major proxy and corporate governance advisory firm, in recommending that shareholders elect all four of the investor’s board of director candidates, according to a Reuters report.

San Francisco-based ValueAct, which owns 4.4% of Seven & i, is unhappy with the Tokyo-based global convenience-store company’s diversified structure and wants to increase its valuation by possibly spinning off its 7-Eleven convenience stores or considering other strategic alternatives. It is also pushing to replace four board members, including Ryuichi Isaka, Seven & i’s president.

“We find that the dissident nominees are generally well qualified to serve on the Seven & i board,” Glass Lewis said in a report cited by the news agency.

Glass Lewis advised against reelecting Isaka, saying the company “has significantly underperformed relative to peers and relevant market indices over the tenure of the current president.”

Meanwhile, Seven & i is attempting to assure shareholders that its current strategy is working and that it is planning longer-term action to enhance value.

In a letter to shareholders on May 2, Seven & i’s board said, “ValueAct’s demands—forcing a change in governance, removing our president and conducting a near-term spinoff of 7-Eleven—would hurt long-term value by disrupting our transformation, which has already begun to benefit our shareholders.”

Seven & i also said it is executing a “food-focused” strategy and is making investments in its convenience-store business.

“Seven-Eleven Japan’s competitive advantage in food is a result of collaboration with our group companies at each stage of the product development and procurement process. This network is difficult for peers to duplicate,” it said. “By leveraging our company’s extensive product development and supply network, our global [convenience-store] business can provide the highest-quality food offerings compared to our competitors—a true differentiator in the industry.”

Seven & i concluded, “Despite their determination to appear constructive, ValueAct is not interested in realizing long-term value creation, and instead is pursuing a narrow agenda to achieve a short-term payout. Our entire board, including the majority independent outside directors, stands behind our business plan.”

Seven & i was founded in 1920 as Ito-Yokado, a chain of department stores. In 1991, Ito-Yokado acquired majority control of 7-Eleven in the United States and internationally. Seven & i was established in 2005 as part of a corporate restructuring to serve as the holding company of Ito-Yokado, Seven-Eleven Japan, Denny’s Japan and other businesses.

Based in Irving, Texas, 7-Eleven Inc. operates, franchises or licenses more than 83,000 convenience stores in 19 countries and regions, including more than 13,000 7-Eleven convenience stores in the United States and Canada. In addition, it operates and franchises Speedway, Stripes, Laredo Taco Company and Raise the Roost Chicken and Biscuits locations.

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