7-Eleven spin-off would jeopardise growth, CEO says, pushing back at ValueAct By Reuters

By Ritsuko Shimizu

TOKYO (Reuters) – The chief executive of Japan’s Seven & i Holdings Co Ltd told Reuters that a 7-Eleven split would jeopardize the convenience store chain’s future growth by cutting it off from its parent company’s strength in the food sector.

The comments come from Ryuichi Isaka as he faces a call for his ouster from shareholder ValueAct Capital, the San Francisco-based investment firm that owns a 4.4% stake in the sprawling Japanese retail conglomerate.

ValueAct has long been critical of Seven & i’s conglomerate structure, calling for the 7-Eleven chain to be split or the entire company sold, but Isaka said that would not be in the chain’s best interests.

“When we think about the growth of the convenience store business over the next five to 10 years, we are open to considering all options but we think it’s not the right decision to spin it off now,” Isaka said in an interview late Thursday. .

“The risk and potential for 7-Eleven’s growth to stall in Japan would be extremely high if the company’s product development resources were cut off,” he said.

In April, ValueAct stepped up pressure on the company, calling for Isaka’s departure and saying he was responsible for a “flawed strategy”.

The contentious battle highlights the increasingly vocal role shareholders — including foreign ones — are playing as they seek better returns in some of Japan Inc’s heavyweights.

ValueAct also wants to replace three more directors at an annual shareholder meeting later this month. Seven & i says such proposals would hurt its long-term value by disrupting its ongoing transformation. It has urged shareholders to support the list of candidates for the board of directors.

Isaka said 7-Eleven relies on staff and knowledge from Seven & i supermarket companies, such as Ito-Yokado, in developing products for its own “Seven Premium” brand.

In overseas markets, not just Japan, he said, there is a relationship between sales of fresh foods such as bento lunches and the number of customers.

To build on its food strength, the company is looking to build a supply network for indigenous products in the United States and Vietnam, he said.