Japan’s Seven & i announces restructuring, new CEO to fend off US$47 billion takeover bid

TOKYO – Seven & i Holdings, the Japanese operator of the 7-Eleven convenience store chain, appointed its first foreign chief executive and handed him the task of overhauling its business to fend off a US$47 billion (S$62.6 billion) overseas takeover bid and engineer a recovery.

After a tumultuous six months that began when it received a buyout offer from Canadian Circle-K operator Alimentation Couche-Tard (ACT), Seven & i announced its most far-reaching leadership and business restructuring on March 6.

Lead outside director Stephen Dacus will succeed Mr Ryuichi Isaka as chief executive on May 27, the company said.

Addressing reporters in Japanese and English, Mr Dacus said talks would continue with Couche-Tard, but significant regulatory hurdles stood in the way of a merger.

“What I do not think our shareholders would want is for us to spend two-plus years in limbo just for that to be rejected by the US courts,” said the American.

Seven & i, which has more than 80,000 7-Eleven stores in 20 countries and regions, also said it agreed to sell its superstore unit to Bain Capital for 814.7 billion yen (S$7.33 billion), and that it would sell down its ownership of Seven Bank to below 40 per cent.

Additionally, the retail conglomerate said it will buy back about two trillion yen worth of shares through fiscal year 2030, and pursue a listing of its North American convenience store subsidiary by the second half of 2026.

Seven & i has been a target of investor criticism over its capital allocation for years, and in August received the ATC buyout offer that was later raised to US$47 billion.

In response, a group led by Seven & i’s founding Ito family mounted its own buyout offer, while the company’s management said it could chart an independent path to recovery.

Mr Dacus told reporters he could identify with 7-Eleven franchisees as his father had been one, and that he had worked the midnight shift in the store as a teen.

The incoming CEO, who previously held executive roles with Walmart and Fast Retailing, has also led a special committee vetting the takeover bids. The Ito family group failed to secure a reported US$58 billion in funding for its offer, scuttling the deal late in February.

Mr Dacus was replaced as head of the special committee by another outside director Paul Yonamine, Seven & i said on March 6.

The special committee will “continue to constructively engage with ACT to determine whether a credible and actionable remedy and divestiture package can be achieved”, it said.

Seven & i shares surged 6.1 per cent on March 6 after Bloomberg News first reported the share buyback plan.

The buyback looked like an attempt to “try to lift market value and fend off” Couche-Tard, said Ms Lorraine Tan, a regional director at Morningstar.

“Fundamentally, one of my immediate concerns is how they are funding the dividends and buyback,” she said. “It appears that they will have to rely on borrowings, but we note the talk of a listing for its US business.”

Some analysts felt Seven & i’s restructuring plan may not derail ACT’s bid for the company.

The announced divestitures leave Seven & i with mainly its convenience store businesses at home and abroad, which is what ACT really wants, said Mr Travis Lundy, a special situations analyst who publishes on Smartkarma.

“Because the IPO is not for a while, it would suggest there is still time for ACT to make a deal for the whole shebang, assuming they can come up with a divestment package,” he said.

Bain said separately on March 6 that it plans to list the superstore unit, known as York Holdings, in about three years after scaling it up through acquisitions.

Isaka reign criticised

Mr Isaka has been with the 7-Eleven operator since 1980, becoming its president in 2016. But his tenure has been criticised by foreign investors, including ValueAct Capital, which tried to oust him in 2023 for pursuing what it said was a flawed strategy.

Mr Isaka led Seven & i’s US$21 billion acquisition of Marathon Petroleum’s Speedway gas stations in 2020, outbidding ACT and greatly expanding the company’s footprint in the North American market.

But some analysts and investors said the company overpaid for the US assets while remaining saddled with low-margin subsidiaries in Japan, such as its superstore segment.

“They jumped into the global market before they had a solid foundation in place,” said independent retail analyst Akihito Nakai. “In hindsight, they got the order wrong.”

More recently, US-based Artisan Partners urged the company to consider a competitive bidding process for takeover proposals. Mr Isaka laid out an independent turnaround plan in October, aiming to roughly double sales to 30 trillion yen by 2030 by expanding overseas and focusing on fresh-food offerings.

Mr Dacus indicated he would stick to the food-centred strategy, saying Seven & i was working with vendors to bring products found in Japan to store shelves in the US.

“I think if we can bring that same quality of food to our stores in the US, that would be a huge and sustainable source of growth,” he said.

If ACT succeeds in winning control of Seven & i, it would be the biggest foreign takeover of a Japanese company.

Seven & i was classified as “core” to Japan’s national security in September, although the Finance Ministry said at the time it would not create hurdles for a takeover. REUTERS