By Ritsuko Shimizu and Rocky Swift
TOKYO (Reuters) -Seven & i Holdings, the Japanese operator of the 7-Eleven convenience store chain, appointed its first foreign CEO and handed him the task of overhauling its business to fend off a $47 billion overseas takeover bid and engineer a recovery.
After a tumultous 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 Thursday.
Lead outside director Stephen Dacus will succeed Ryuichi Isaka as chief executive on May 27, the company said.
Addressing reporters in Japanese and English, 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 U.S. courts,” he said.
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 ($5.50 billion) and that it would sell down its ownership of Seven Bank to below 40%.
Additionally, the retail conglomerate said it will buy back about 2 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 the target of investor criticism over its capital allocation for years, and in August received the ACT buyout offer that was later raised to $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 they could chart an independent path to recovery.
Dacus told reporters he could identify with 7-Eleven franchisees as his father had been one, and that he’d worked the midnight shift in the store as a teenager.
The incoming CEO, who previously held executive roles with Walmart and Fast Retailing, also led a special committee vetting the takeover bids. The Ito family group failed to secure a reported $58 billion in funding for its offer, scuttling the deal late last month.
Dacus was replaced as head of the special committee by another outside director, Paul Yonamine, the company said on Thursday.
Seven & i shares surged 6.1% on Thursday 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 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 U.S. business.”
Some analysts felt Seven & i’s restructuring plan may not derail ACT’s bid for the company.
The announced divestitures leave Seven & i mainly with its convenience store businesses at home and abroad, which is what ACT really wants, said 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 Thursday it plans to list the superstore unit, known as York Holdings, in about three years after scaling it up through acquisitions.
ISAKA REIGN CRITICISED
Seven & i turned the humble 7-Eleven store into a popular food destination in Japan by serving up fresh sandwiches, rice balls and rows of boxed lunches, changing how millions of people eat.
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.
Isaka led Seven & i’s $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 U.S. 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, U.S.-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 roughly double sales to 30 trillion yen by 2030 by expanding overseas and focusing on fresh-food offerings.
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.
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.
($1 = 148.2200 yen)
(Reporting by Ritsuko Shimizu and Rocky Swift; Editing by Neil Fullick, Muralikumar Anantharaman and Jan Harvey)
