ValueAct urges 7-Eleven owner to examine alternative strategies (updated)

JSR

25/01/2022 20:02

(Adds details from letter)
    By Svea Herbst-Bayliss
    BOSTON, Jan 25 (Reuters) - ValueAct Capital has called on
7-Eleven's owner Seven & i Holdings  3382.T  to listen to
shareholder concerns and to consider strategic alternatives,
including a possible sale.
    U.S.-based investment firm ValueAct has written to the
Japanese company's board to say it must quickly pursue "bold,
structural reform", calling it "strategically unfocused" and
saying it is "vastly underperforming its potential".
    There has been growing frustration among investors in the
7-Eleven convenience store chain's owner about its lagging share
price, with some shareholders pushing it to break up.
    Seven & i should "consider alternative ownership structures
for its business units as well as the whole company to achieve
the focus necessary to improve competitiveness and performance
of the businesses, especially 7-Eleven," ValueAct's letter said.
    ValueAct, which owns a 4.4% stake in Seven & i, said it is
making two requests of the board and was making the letter
public, a rare step for the investment firm.
    To put extra pressure on the board, ValueAct said it also
wants to hear a public response to its requests after the next
regularly scheduled board meeting, which is in early February.
    It said it wants one or more outside directors from Seven &
i to contact portfolio managers at 30 of the company's biggest
investors to "listen directly to their views."
    And it called for the creation of a "Strategic Review
Committee", made up of only outside directors to consider
whether the "sale or spin-off of divisions or a business
combination with a third party would deliver superior value and
strategic benefits to the company and its stakeholders."
    Such a public statement is a highly unusual step for
ValueAct, which has spent decades building a reputation for
working collaboratively with management instead of dictating
terms publicly as many activist investors have done.
    It is one of a small number of U.S. firms that have invested
more heavily in Japanese companies and have quietly tried to
work with management and the boards to make some changes.
    Its holding in Seven & i follows investments in Nintendo
 7974.T  Olympus Corp  7733.T  and JSR Corp  4185.T .
    While ValueAct had engaged with Seven & i privately it said
the response "has been unsatisfactory", adding that it has "lost
confidence in management's ability to set the strategic course
without direct and public input from independent shareholders."
    ValueAct is the biggest actively managed institutional
shareholder in Seven & i. Fund managers T. Rowe Price and
Artisan Partners and pension fund California Public Employees
Retirement System hold smaller stakes.
    In its letter, ValueAct also said that it may make
shareholder proposals at the company's annual meeting.
    This week the Financial Times reported that three investors,
who have previously told the company that sweeping reform is
necessary, may also submit proposals at the meeting expected to
take place in May or June.   

 (Reporting by Svea Herbst-Bayliss; Editing by Chizu Nomiyama
and Alexander Smith)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))