ValueAct Capital Management LP said it doubts the independence and efficacy of Seven & i Holdings Co.’s strategic review, calling for management to respond to its questions.
(Bloomberg) — ValueAct Capital Management LP said it doubts the independence and efficacy of Seven & i Holdings Co.’s strategic review, calling for management to respond to its questions.
The global retailer is sticking to a conglomerate structure and the board isn’t considering strategic alternatives and should explain why, the activist investor wrote in an open letter to the company’s board on Sunday.
ValueAct has been pushing the Tokyo-based retailer to improve its valuation, calling on Seven & i’s managers to “pursue bold, structural reform and pursue it with urgency.” It asked Seven & i to narrow its business focus to 7-Eleven, which it asserted could lead the retailer to more than double its share price.
“Seven & i is at a pivotal point in its evolution, with a clear opportunity to create a global champion 7-Eleven company,” the investor said in the letter.
The retailer confirmed receiving the letter from ValueAct, and is conducting a thorough review of the contents internally, a spokesperson for Seven & i said.
ValueAct said it has little confidence in Seven & i’s mid-term business plan revealed on March 9. Shareholders deserve simple, factual answers to the investor’s questions on April 6 when the retailer is scheduled to release its earnings, it added.
Last April, Seven & i said it revamped its board so that a majority would be independent outside directors. In November it announced a sale of its Sogo & Seibu Co. department store for an enterprise value of about ¥250 billion ($1.9 billion) to private equity firm Fortress Investment Group. The transaction of the deal, which was scheduled to complete in March, is delayed, it said last week.
Seven & i announced on March 9 the closing of roughly one out of every four of its Ito-Yokado shoops in Japan to focus more on it core food and convenience-store operations, marking the retailer’s latest response to pressure from ValueAct.
The retailer’s shares fell as much as 12% since the March announcement, but have regained some of that drop to trade at around ¥6,000. The 7-Eleven global franchise, as a standalone listed company, could be worth as much as ¥8,500, according to ValueAct.
Seven & i has more than 83,000 stores worldwide, including the Speedway gas-station franchise in the U.S. 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.
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