© Reuters. FILE PHOTO: The 7-Eleven logo is seen at a 7-Eleven convenience store in Tokyo, Japan, December 6, 2017. REUTERS/Toru Hanai/File Photo/File Photo
By Svea Herbst-Bayliss
NEW YORK (Reuters) – ValueAct Capital is pressing Seven & i Holdings to explain its corporate strategy to shareholders, including why it does not spin off its 7-Eleven convenience store chain or consider selling the entire company.
The investment firm, which owns a 4.4% stake and has been pushing for change since 2020, is ramping up the pressure ahead of the company’s April 6 earnings call and annual meeting at which 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 that recent communication raised concerns about “entrenchment.”
The investment firm, which has a history of investing in Japan and has board seats at Olympus Corp and JSR Corp, has suggested a tax-free spin-off of 7-Eleven or even a sale of the entire company.
A company representative was not immediately available for comment and ValueAct declined to comment further beyond the letter.
Last month, Seven & i signaled a “continuation of its status quo conglomerate structure,” which confused and disappointed the markets, according to the letter.
Now ValueAct wants answers to nine key questions when the company reports its earnings this week.
Does the board understand how frustrating the conglomerate structure is for shareholders and has it evaluated the conglomerate discount, the investment firm asked.
And he wants answers to what strategic alternatives were considered and why the company has not gone ahead with a tax-free spinoff of 7-Eleven, something ValueAct had asked company management to do in January.
The spin-off could be completed via a listing on the Tokyo Stock Exchange in about a year, ValueAct previously said.
He also wants to know why the company is not being put up for sale and whether the board is aware of Seven & i’s acquisition approaches over the past five years.
Seven & i said in March that it will close an additional 14 Ito-Yokado supermarket stores in Japan and abandon its clothing business entirely as part of a structural reform plan.
ValueAct’s latest letter endorses its effort to replace four members of the company’s 14-member board with four director candidates it has not publicly identified.
