After watching its shares plunge last week following plans to reject a US$47 billion takeover offer by Canadian Circle-K operator Alimentation Couche-Tard (ACT), 7-Eleven’s Japanese owner Seven & I Holdings has appointed an American CEO to overhaul the business and fend off future bids.
Stephen Dacus, a former executive with Walmart and Fast Retailing – and the company’s first foreign CEO – has been charged with engineering a far-reaching recovery for the convenience store chain’s 80,000 7-Eleven stores in 20 countries and regions.
While talks between 7-Eleven and Couche-Tard – which started last August - are ongoing, Dacus told reporters that spending two plus years in limbo just for the bid to be rejected by the US courts would not be in the best interests of shareholders.
Dacus was referring to significant regulatory hurdles that currently stand in the way of any future merger.
Meanwhile, the retail conglomerate has agreed to A) sell its superstore unit to Bain Capital for 814.7 billion yen (US$5.50 billion) and B) sell down its ownership of Seven Bank to below 40%.
The retail conglomerate’s share price surged 6.1% last Thursday following announced plans to A) buy back around 2 trillion yen (US$13.5 billion) worth of shares between now and FY30. And B) pursue a listing of its North American convenience store subsidiary by the second half of 2026.
According to Lorraine Tan, a regional director at Morningstar the buyback appears to be an attempt to “try to lift market value and fend off” Couche-Tard.
“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.”
However, other analysts question whether Seven & I’s restructuring plan will do anything to deter ACT’s to take over the company.
The announced divestitures leave Seven & I mainly with its convenience store businesses at home and abroad, which is what ACT really wants, notes 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.
7-Eleven’s outgoing CEO Ryuichi Isaka has been the subject of foreign investors' criticism for paying too much for a number of U.S. assets and saddling it with low-margin subsidiaries in Japan.
The Isaka-led Seven & I’s $21 billion acquisition of Marathon Petroleum’s Speedway gas stations in 2020, outbid ACT and greatly expanded the company’s footprint in the North American market.
“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, United States-based Artisan Partners urged the company to consider a competitive bidding process for takeover proposals.
Isaka laid out a turnaround plan in October, aiming to double sales to 30 trillion yen by 2030 by expanding overseas and focusing on fresh-food offerings.
However, Dacus indicated he would stick to the food-centred strategy, saying Seven & I was working with vendors to bring the products found in Japan to store shelves in the U.S.
“I think if we can bring that same quality of food to our stores in the U.S., that would be a huge and sustainable source of growth,” he said.
Assuming ACT finally succeeds in winning control of Seven & I, it will mark 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.
