Artisan Partners International Value Strategy, an investor of Seven & i Holdings, is pushing the company to promptly review Circle K-owner Alimentation Couche-Tard’s (ACT) proposal to purchase the company. The investor, who owns more than 1% of the outstanding shares of 7-Eleven’s parent company, asked Seven & i Holdings for an update on negotiations by Sept. 19.
In Artisan Partners’ Aug. 30 letter, N. David Samra, portfolio manager, and Benjamin L. Herrick, associate portfolio manager, told members of Seven & i Holdings board that it was “imperative that the board of directors negotiate with ACT immediately to achieve the best possible outcome for shareholders.”
Convenience-store operator Couche-Tard on Aug. 19 submitted a proposal to acquire Seven & i Holdings Co. Ltd. The Seven & i board of directors has formed a special committee, comprised solely of independent outside directors, led by Stephen Hayes Dacus as chairperson, to review the proposal, the company said at the time.
But so far, neither the board of directors nor the committee has made any determination to either accept or reject the proposal from ACT, to enter discussions with ACT or to pursue any alternative transaction, Artisan Partners said.
The managers said Seven & i Holdings had deferred opportunities to enhance corporate value on several occasions. It said ACT is uniquely positioned to enhance Seven & i’s corporate value as ACT acquired Circle K in 2004 and expanded the brand across the United States and globally.
“7-Eleven has tremendous brand power that could be leveraged on a global basis,” the letter said.
Samra and Herrick in the letter stressed the urgency of the situation.
“Negotiating with ACT is the best tactic to preserve positive stakeholder outcomes in Japan. In an effort to maximize shareholder and stakeholder value, we encourage you to solicit offers for the company’s Japanese subsidiaries as quickly as possible,” the pair said. “Failure to engage with ACT and other potential partners could result in a less favorable outcome with less flexibility.”
The Japanese government laid the foundation over the past decade in preparation for this moment, the letter said, and progress in corporate Japan has been tremendous. But Seven & i is considering ways to block a takeover bid from Couche-Tard, according to Bloomberg.
- 7-Eleven is No. 1 on CSP’s 2024 Top 202 ranking of U.S. c-store chains by store count. Alimentation Couche-Tard is No. 2.
It is seeking reclassification of 7-Eleven’s status from a “non-core” to “core” rating or “protected” status under Japan’s Foreign Exchange and Foreign Trade Act, insider sources said. That change would allow the government to weigh in on the deal if the parties reach an agreement, said the report. It would require prior notification of any purchase of its shares above 10%.
“These rumors, along with the lack of official communication from the company, are troubling. 7-Eleven was originally an American business. It was only in the early 1990’s that Ito-Yokado seized on the managerial missteps of Texas-based Southland Corp. and acquired a controlling stake. Changing the company’s FEFTA status to “core” after a takeover offer has been made is like changing the rules halfway through the game. Shareholders deserve a fair and independent process,” Samra and Herrick said.
The outcome of this process has potentially historic implications, they said, emphasizing the importance of a quick response.
“It is unfortunate the urgency of the situation was not internalized,” Artisan Partners, Milwaukee, Wisconsin, said. “Management has not reacted quickly enough to the issues facing this company for nearly a decade. Speed is critical if the company is going to achieve its goal ‘to become a world-class retail group.’”
Seven & i is a global operator of convenience stores, superstores, supermarkets, specialty stores, foodservices, financial services and IT services. 7–Eleven International LLC franchises or licenses more than 44,000 stores in 19 countries and regions. The brand also operates corporate or franchise stores in the United States, Canada, Mexico and Japan. Globally, the 7-Eleven trademark is represented in approximately 83,000 stores.
Irving, Texas-based 7-Eleven Inc. operates, franchises or licenses more than 83,000 convenience stores in 19 countries and regions, including more than 13,000 7-Eleven convenience stores in the United States.
Laval, Quebec-based Couche-Tard operates in 31 countries and territories, with more than 16,700 stores. Its network includes more than 7,100 stores in the United States under the Circle K and Holiday Stationstores banners, and approximately 2,100 in Canada under the Circle K and Couche-Tard banners.
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