Mergers & Acquisitions

Investor Calls for New Leadership at Seven & i

‘It is time to find a new president,’ ValueAct says
seven & i
Photograph: Shutterstock

Continuing its efforts to effect change at 7-Eleven parent Seven & i Holdings Co. Ltd., investor ValueAct Capital has submitted a proposal ahead of the retail company’s annual shareholders’ meeting in May to replace Seven & i’s president, Ryuichi Isaka.

“We exercise our rights as shareholders in order to remove the president,” the San Francisco-based investment firm said in a letter dated April 20. “ValueAct intends to support the reformed board through a careful, independent process to select a new president in line with Japan’s Corporate Governance Code.”

ValueAct Capital, which owns a 4.4% stake in Seven & i, is unhappy with the Tokyo-based global convenience-store company’s diversified structure and wants to increase its valuation by spinning off its 7-Eleven convenience stores, among other possible strategic alternatives.

“ValueAct believes that Seven & i is at a pivotal point in its evolution, with a clear opportunity to create a global champion 7-Eleven company,” ValueAct has said in a recent letter and presentation. ValueAct also cited a “failed corporate strategy” and “governance failures” for its recommendations.

The shareholder has been lobbying to replace four directors, including Isaka, on the Japanese’s company’s 14-member board. ValueAct said that the directors “failed to disclose a reported acquisition proposal to the company in 2020,” failed to conduct an objective succession review and did not conduct an independent strategic review in line with governance best practices.

Seven & i said it will oppose all four of ValueAct’s nominees to replace them.

Isaka joined Seven-Eleven Japan Co. Ltd. in 1980 and became a director in 2002. He became executive officer and president of the company in 2016.

“Over his seven-year tenure, the president has established a record of entrenchment,” ValueAct said in its latest letter. It said Isaka has authorized two “particularly troubling” corporate governance decisions, alleging he denied an independent investigation into the company’s practice of recording shareholders without their consent, and the March 15 leak to a journalist of a recording of a meeting in California attended by outside directors.

“On March 23, a subordinate of the president confirmed the existence of a recording and then characterized recording without consent as an acceptable practice,” ValueAct said. “We stand by everything we have communicated to Seven & i including on March 15, but recording without consent implicates privacy laws in many jurisdictions in which Seven & i has substantial operations and shareholder presence.”

ValueAct asked the board to investigate this recording practice and the leak of confidential information. “We understand there has been no independent investigation,” it said. “We feel it is important to alert shareholders participating in meetings with Seven & i of their practice of recording, which we believe is not limited to interactions with ValueAct.”

The investor also said that Isaka “denied an independent review of ValueAct’s shareholder proposal despite the conflicts of interests of the majority of the board.”

ValueAct’s proposal nominated four independent business leaders as outside directors. “Shareholders would expect an independent process to evaluate our proposal, including the recusal of all directors who face a conflict of interest, it said in the letter. “The majority of Seven & i’s current directors are conflicted: the president, the subordinates of the president and the outside directors whom we propose to remove from the board. We understand these conflicted directors were not recused from the review of our proposal.”

ValueAct cites the refusal to investigate the recording and the dial of an independent review of its proposal as “the latest examples in a series of substantive bad faith interactions ValueAct has had with the president and his subordinates over two years.”

“Under the current president, stakeholders have experienced seven years of weak execution in pursuit of a flawed strategy,” it continued. “Independent surveys of Seven & i’s stakeholders show the majority of employees are not engaged, the majority of shareholders do not support the current strategy or corporate structure and the majority of 7-Eleven franchisees have health and safety concerns. We have shared such objective data with the president and his subordinates, and their reaction has been to ignore, dismiss and fail to act. It is time to find a new president for Seven & i.

“ValueAct’s shareholder proposal is to elect a board with the skills, independence and mandate to appoint a new president and representative director who will prioritize the interests of shareholders in considering strategic choices and lead the company as a global champion,” said ValueAct.

The shareholder’s proposal for Seven & i's board:

  • Removes four incumbent directors: President and Representative Director Ryuichi Isaka, Vice President and Representative Director Katsuhiro Goto, Chairman of the Nomination Committee Kunio Ito and Member of the Nomination Committee Toshiro Yonemura
  • Re-elects the six new independent outside directors who joined the board in 2022 and the four inside directors who directly manage major businesses and group functions to maintain “operational continuity.” This includes Director and Senior Managing Executive Officer Joe DePinto, who is president and CEO of 7-Eleven Inc., Irving Texas.
  • Nominates four new independent outside directors: Katsuya Natori, Dene Rogers, Ron Gill and Brittni Levinson.

7-Eleven Inc. is No. 1 on CSP’s 2023 Top 40 update to the 2022 Top 202 ranking of U.S. convenience-store chains by store count. It 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. 7-Eleven has not responded to CSP requests for comment.

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