As activist investor ValueAct Capital pushes Seven & i Holdings Co. Ltd. to spin off its 7-Eleven convenience stores and spearheads an effort to replace four of its 14 board members, the company said on Tuesday that it will oppose all four of ValueAct’s nominees ahead of the annual shareholders meeting on May 25.
The San Francisco-based investor, 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 separating 7-Eleven from other businesses, 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 its latest letter and presentation. ValueAct also cited a “failed corporate strategy” and “governance failures” for its recommendations.
While Seven & i's board has agreed to reappoint 13 directors, including current President Ryuichi Isaka and two other directors that ValueAct wants to replace, the company has rejected the candidates.
“None of ValueAct's nominees have experience in significant business transformations,” Seven & i said in a new presentation to investors, “while our nominees have Japanese and international strategy experience and business execution experience through all business cycles.”
In a new letter, Seven & i said that since 2016, it has implemented a strategy of “positioning the convenience-store business in Japan and the United States as the pillar of the group’s growth and focusing management resources.”
It said that in 2022, the company implemented a “bold” change in the composition of the board to have a majority of outside directors and announcing the results of its Group Strategy Revaluation “focusing on the growth strategy of the c-store business in Japan and overseas while positioning food as our strength.” It also set up a Strategy Committee consisting only of independent outside directors.
Through these efforts, Seven & i is achieving “steady” earnings growth, it said, with consolidated revenues from operations and operating profit reaching record levels in fiscal-year 2022, as well as upgrading financial targets though 2025, the company said.
“In order to establish a management structure that will contribute to further growth and maximize corporate and shareholder value over the long term, we considered the composition of the board of directors, with an emphasis on skillsets in areas such as ‘experience leading a listed company or other relevant organization in a chief executive role,’ experience and knowledge to realize the group’s growth strategy in terms of food, DX [digital transformation], global management and ‘experience and expertise in business transformation’ in line with group strategy, in keeping with the group's accomplishments to date,” Seven & i said.
The Seven & i board opposes ValueAct’s Proposal because,” after fair consideration and deliberation of the proposed new board of directors structure, taking into account the overall skill sets required of the company's directors and interviews with the four candidates in the shareholder proposal and the company's Nomination Committee, it was determined that the candidates proposed by the company would be more appropriate.”
It added that “the reasons outlined in the shareholder proposal include various misrepresentations and distortions of the facts regarding the group’s initiatives and progress.”
- 7-Eleven isNo. 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 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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