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A prominent shareholder in Seven & i Holdings has set a deadline for the Japanese convenience store giant to update investors on the takeover bid by Canada’s Couche-Tard, warning that management will be “held accountable” if it did not immediately open negotiations with the buyer.
The investors also warned that government intervention in the takeover attempt would signal that Japan was not serious about a series of recent reforms aimed at stimulating mergers and acquisition activity and pushing companies to improve asset efficiency.
The deadline set by two portfolio managers at US-based Artisan Partners was sent in a letter to the board of Seven & i on Friday night, 11 days after the company that controls the 85,000-strong global network of 7-Eleven stores revealed that it had received the unsolicited approach from Couche-Tard.
Although Seven & i said at the time that it had established a special committee to examine the bid, no other details — such as the offered price range, the terms or when the bid was first tabled — have been shared.
Seven & i has not named the members of the special committee, provided evidence that the committee is fully independent or said when it will reach its conclusion. Multiple investors have privately described the level of secrecy to the Financial Times as frustrating.
In the letter, Artisan’s David Samra and Ben Herrick asked for Seven & i to brief shareholders on the status of takeover negotiations by September 19, citing the “historic implications” of a process that has captivated the Tokyo market and could represent the biggest takeover of a Japanese company by a foreigner.
A spokesman for Seven & i declined to comment.
Analysts have speculated that a successful bid for Seven & i could cost a buyer between $40-50bn. The company’s market capitalisation before the bid was made public stood at roughly $31bn.
Artisan is not generally considered an activist shareholder, but has become the first big investor in Seven & i to go public with criticism of the company’s behaviour and express concern that management might snub an opportunity to enhance shareholder value.
Artisan’s letter argued that negotiating with Couche-Tard represented Seven & i’s best tactic to secure “positive stakeholder outcomes in Japan” and called on the company to solicit offers for the retail conglomerate’s many subsidiaries as soon as possible.
“Failure to engage with ACT [Couche-Tard] and other potential partners could result in a less favourable outcome with less flexibility,” warned the letter.
Artisan blamed Seven & i’s management for deferring “opportunities to enhance corporate value on several occasions”. The portfolio managers argued that the undisturbed share price o f the Japanese group — meaning before the impact of the offer from Couche-Tard — “was nearly at the same level as it was in 2016 when many of the current executive directors were in place”.
“In US dollar terms, the currency in which the lion’s share of the company’s capital has been deployed, the results are worse. Since 26 May 2022, the day on which most of the current independent directors were elected, the company’s share price has underperformed the Nikkei 225 and TOPIX by more than 40 per cent,” they added.
Artisan meanwhile recommended Couche-Tard, which controls the Circle K convenience store chain in North America, as “uniquely positioned to enhance [Seven & i] corporate value” by taking advantage of the Japanese group’s “tremendous brand power”.
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