Activist investor ValueAct Capital, which has previously urged Seven & i Holdings Ltd. to spin off its 7-Eleven convenience-store chain, told Seven & i that it will lobby to remove four directors from the Japanese’s company’s 14-member board, according to a Reuters report. ValueAct, which owns a 4.4% stake in Seven & i, cited a “failed corporate strategy” and “governance failures” for the proposed board change.
In a letter reviewed the news agency, the San Francisco-based hedge fund said it had become frustrated that its engagement with Tokyo-based Seven & i over several months had not led to the company adopting a strategy to grow faster and improve profitability and its market valuation.
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, the letter said.
The letter did not state how ValueAct would seek to oust the four directors, whom it did not publicly identify, said the report.
Seven & i declined to comment to Reuters and did not respond to a CSP request for comment. 7-Eleven declined to comment to CSP by posting time.
Six new directors joined Seven & i’s board last year, Reuters said. ValueAct supported those newcomers at the time, said the report.
ValueAct also 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, Reuters reported.
ValueAct told investors in May 2021 that Seven & i could be worth more than double its current value if the company restructures itself to focus on convenience stores or if it spins off 7-Eleven.
In January 2022, ValueAct again asked the Seven & i board to conduct a strategic review of alternatives for all of its business units, consisting of c-stores, supermarkets, department stores and specialty stores. Seven & i operates more than 83,000 stores under several formats globally. Approximately 78,000 of those stores are 7-Eleven c-stores.
ValueAct said in a letter to the board at the time that Seven & i “is strategically unfocused and vastly underperforming its potential. This, while the retail industry is evolving rapidly with new disruptive forces entering Seven & i’s markets. The 7-Eleven convenience-store business already accounts for 97% of operating profit and over 100% of corporate value creation. … If Seven & i narrows its focus to 7- Eleven, it can become the global champion in a growing industry. If its attention remains scattered, it risks drifting into mediocrity or worse.”
Seven & i said it is having “active and constructive management-and working-level dialogues … with the aim of enhancing our corporate value in a sustainable manner,” is reviewing ValueAct’s proposal and will “respond appropriately.”
In November 2022, Seven & i sold its Sogo & Seibu Co. department store chain for $1.8 billion to Fortress Investment Group, New York, according to a Bloomberg report. Earlier this month, it began closing its Ito-Yokado supermarkets in Japan and exiting the apparel business, reported the Econotimes.
- 7-Eleven 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.
Irving, Texas-based 7-Eleven operates, franchises or licenses more than 83,000 convenience stores in 19 countries and regions, including about 13,000 in the United States, including about 9,500 under the 7-Eleven banner, around 3,800 under the Speedway banner and about 500 under the Stripes flag, as well as the Laredo Taco Company and Raise the Roost Chicken and Biscuits brands.
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