Seven & I shareholders back new board to deal with takeover proposal
Seven & I Holdings shareholders approved a new board at a low-key annual meeting, despite the drama surrounding a company facing a takeover proposal by Alimentation Couche-Tard, the operator of Circle K stores.
Although some of the roughly 800 in attendance on Tuesday criticized the board's revamp and compensation, all of the company's proposals passed. Tallies are usually disclosed at a later date.
Investors appear to be willing to see what happens with the radical overhaul, which the Japanese retailer had pledged to counter Couche-Tard's ¥7.39 trillion ($51.5 billion) approach. That effort is being led by new CEO Stephen Dacus, who presided over the meeting.
While Seven & I has been slow to engage with its Canadian suitor, the operator of 7-Eleven stores has recently signed a nondisclosure agreement (NDA) to share financial data with Couche-Tard. It has also agreed to explore a sale of 2,000 overlapping North American convenience stores — a prerequisite to resolve any antitrust concerns. These steps appear to have been enough to put shareholders into wait-and-see mode.
'We will continue to provide information on progress to our shareholders while complying with the NDA,' Ryuichi Isaka, the outgoing CEO, said at the meeting. 'We will continue to compare and evaluate our plan with the external proposal, as we seek to maximize value for shareholders and all stakeholders.'
Alain Bouchard, Couche-Tard's chairman, has said he could propose a higher price for Seven & I once he has a chance to take a closer look at the Japanese company's financial information.
Meanwhile, Seven & I is seeking to bolster its valuation through a series of strategic moves, including selling off underperforming retail assets, listing its U.S. operations, buying back shares and appointing new leadership.
'The real significance lies in execution of these measures, whether these steps translate into sustained financial performance and a stock re-rating,' said Bloomberg Intelligence analyst Lea El-Hage. Shareholders are waiting for 'tangible execution,' she added.
That appears to be the approach taken by Artisan Partners, which last year urged Seven & I to negotiate a deal with Couche-Tard for a takeover price that maximizes shareholder value.
While Seven & I's shares have bounced back from lows after the restructuring measures were announced, its market value remains at ¥5.66 trillion, roughly 23% below the price Couche-Tard is willing to pay.
The NDA between the companies includes a standstill provision, which are usually designed to prevent a potential buyer from making a hostile bid. In the meantime, it will probably take months for Couche-Tard to fully evaluate Seven & I's financials and for the company to show whether its restructuring efforts are gaining any traction.
Any future decisions by Seven & I will also be shaped by a board that will bring in five new directors: Shigeki Kimura, Seven & I executive vice president; Takashi Sawada, former CEO of FamilyMart; Masaki Akita, chairman of Matsuya; Tatsuya Terazawa, former Ministry of Economy, Trade and Industry director general; and Christine Edman, former Hennes & Mauritz Japan president.
'Shareholders are not as disappointed as they were,' said Lorraine Tan, an analyst at Morningstar Asia. 'Criticisms have been partly appeased.'
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