Activist fund ValueAct Capital Management LP’s proposal to appoint four new directors for Seven & i Holdings Co. risks destroying shareholder value, the company said in presentation materials released on Tuesday.
(Bloomberg) — Activist fund ValueAct Capital Management LP’s proposal to appoint four new directors for Seven & i Holdings Co. risks destroying shareholder value, the company said in presentation materials released on Tuesday.
Three of ValueAct’s nominees “have no food or retail experience and the fourth has a highly checkered history with no relevant experience in the past five years in a rapidly evolving industry,” the convenience-store operator said. “7&i’s nominees have deep knowledge of the challenges and opportunities in our business as executives and directors.”
ValueAct, which owns at least 1.9% of Seven & i, has been pushing it to improve its valuation, calling on the Tokyo-based retailer to “pursue bold, structural reform and pursue it with urgency.” The investor said Seven & i should narrow its business focus to 7-Eleven, which it said could become a global champion as a convenience store franchise and boost the company’s value.
In response, Seven & i revamped its board last year so that a majority would be independent outside directors, and agreed to sell its Sogo & Seibu Co. department store for an enterprise value of about ¥250 billion ($1.9 billion) to Fortress Investment Group. The retailer is also transfering its credit-card and electric-money business to Seven Bank, from its Seven Financial services unit, and is selling Barneys Japan stores to retailer Laox Holdings Co.
Earlier this month, Seven & i said it will consider strategic options, including spinoffs and public listings. A new review committee of outside board members will recommend changes and execute them, the retailer’s eight independent directors said on April 6.
Seven & i’s shares are up 6.4% this year, after climbing 12% in 2022. The annual shareholders’ meeting is scheduled for May 25.
Board member Kunio Ito will retire and will be replaced by two new directors, Shinji Wada, an executive officer at Nippon Gas Co. and Fuminao Hachiuma, former chief executive officer of J-Oil Mills Inc., according to Seven & i. The company’s nominees have “a track record of creating value and taking proactive steps to streamline our business to abandon its conglomerate structure.”
ValueAct is seeking to install the following board candidates, Seven & i said in the presentation, giving reasons why the company believes they are unqualified:
- Lawyer Katsuya Natori, board member at Tokyo Steel Manufacturing Co. and an auditor for companies including Recruit Holdings Co.
- Dene Rogers, a former Kmart and Sears executive
- Ronald Gill, operating partner at Lead Edge Capital, and a director at HubSpot
- Brittni Levinson, head of sustainability, ValueAct Capital
The board’s nominating committee met “with several candidates, including those proposed by our shareholders, for the board positions and has decided to recommend the aforementioned candidates to achieve the group’s optimal governance system,” the company said.
Seven & i has more than 83,000 stores worldwide, including the Speedway gas-station franchise in the US. The company is best known for its 7-Eleven stores, and its operations include Denny’s Corp.’s Japan restaurants, the Ito-Yokado supermarket chain and even its own bank.
Seven & i said earlier this month that it will keep paying out dividends, improve operating cash flow, embrace financial integrity and focus on growth in its convenience-store business in order to boost the ratio of total shareholder returns to 50% or more through fiscal 2025.
(Updates with ValueAct’s proposal in sixth paragraph.)
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