ValueAct questions Seven & i strategy, pushes 7-Eleven spin-off

OLYMPUS

02/04/2023 19:45

By Svea Herbst-Bayliss
       NEW YORK, April 2 (Reuters) - ValueAct Capital is
pushing Seven & i Holdings  3382.T  to explain its corporate
strategy to shareholders including why it is not spinning off of
its 7-Eleven convenience store chain or considering selling the
whole company.
    The investment firm, which owns a 4.4% stake and has been
pushing for change since 2020, is ratcheting up pressure before
the company's April 6 earnings call and the annual meeting where
it seeks to replace four board members.
    "We have been unable to establish confidence in the
management or governance of Seven & i," ValueAct wrote in a
letter to the company's board dated April 2, adding recent
communication heightened concern about "entrenchment."
    The investment firm, which has a track record of investments
in Japan and has board seats at Olympus Corp  7733.T  and JSR
Corp  4185.T , has suggested a tax-free spin off of 7-Eleven or
even a sale of the entire company.
        A representative for the company was not immediately
available for comment and ValueAct declined further comment
beyond the letter.
  
    Last month Seven & i signaled a "continuation of its status
quo conglomerate structure," which confused and disappointed
markets, the letter said. 
    Now ValueAct wants answers to nine key questions when the
company reports earnings this week.
    Does the board understand how frustrating the conglomerate
structure is to shareholders and has it evaluated the
conglomerate discount, the investment firm asked.
    And it wants to answers to which strategic alternatives were
considered and why the company has not pushed ahead with a
tax-free spin-off of 7-Eleven, something ValueAct had called on
the company's management to do in January.
    The spin-off could be completed through a listing on the
Tokyo Stock Exchange in roughly a year, ValueAct said earlier.
    It also wants to know why the company is not putting itself
up for sale and whether the board is aware of any takeover
approaches for Seven & i in the last five years.
    Seven & i said in March that it will close an additional 14
Ito-Yokado supermarket stores in Japan and fully exit its
apparel business as part of a structural reform plan.  
    ValueAct's latest letter underpins its effort to replace
four board members on the company's 14-member board with four
director candidates that it has not identified publicly.
    

 (Reporting by Svea Herbst-Bayliss; Editing by Josie Kao)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))