Seven & I Climbs on Reports It Will Sell Ito-Yokado Stores Unit

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(Bloomberg) — Seven & i Holdings Co. rose slightly on reports that it plans to list or sell part of its supermarket unit Ito-Yokado, which has been under pressure to restructure in the face of intensifying competition from discount stores and online retailers.

A listing could take years to complete and the Japanese retailer is expected to hold shares in the entity, the Kyodo news agency said. The Nikkei newspaper reported that Seven & i is looking to set up a new intermediate holding company for its general merchandising chains, including Ito-Yokado and York-Benimaru. The stock was up as much as 1.2% in early morning trading in Tokyo. 

Activist investor ValueAct called on Seven & i last year to improve its valuation, calling on the retailer to embrace “bold, structural reform and pursue it with urgency.” The Tokyo-based convenience store giant has taken some steps, including considering closing stores. President and Chief Executive Officer Ryuichi Isaka may a plan on Wednesday when the retailer reports full-year results.

A decision on whether to list Ito-Yokado hasn’t been made, according to company spokesperson Muneyuki Takeda.

Speculation has been swirling for months over the fate of Ito-Yokado, which was the company’s original retail franchise before it bought 7-Eleven and turned it into a large, successful business. Toyo Keizai had reported before that Seven & i was considering a potential sale, while local media have reported a series of store closures across the country with plans for more, including shutting four near Tokyo from this summer.

The company is pursing a listing despite Ito-Yokado’s sluggish performance as it sees a path toward rebuilding its business, Kyodo reported.

Seven & i has previously announced a partnership with the supermarket unit to add more diverse products to its bigger convenience stores. 

Read More: 7-Eleven Tests a New Store Aimed at Delivering More Convenience

Seven & i shares were up almost 17% this year before the reports. The company announced share buybacks late last year as well as a 3-for-1 stock split.

Last year, ValueAct pressed the retailer to split off operations and focus on the the 7-Eleven convenience-store business. Seven & i operates Ito Yokado general stores, Denny’s Japan restaurants and a successful banking network. Last year, Seven & i finalized the sale of its Sogo & Seibu Co. department store chain to Fortress Investment Group at an enterprise value of about ¥220 billion.

When asked about the investor’s assertions an interview earlier this year, Isaka said they’re not limited to ValueAct, because he’s heard similar comments from other shareholders. Breaking up the group would risk destroying shareholder value, Seven & i has said, pushing back against the investor’s demands. In response last year, ValueAct sought to replace Isaka and other board members with its own candidates, but failed. 

Read More: Japan’s Convenience Stores Can Span the Globe, 7-Eleven CEO Says

“What we are explaining is that if we are to transfer the growth of 7-Eleven Japan to the rest of the world, we must transfer the success of 7-Eleven Japan’s food business as well,” Isaka said in the interview. “If we simply increase the number of stores, we will be building a tower on a very weak foundation.”

It’s not clear whether ValueAct remains a major shareholder. The investor is no longer on a list of stakeholders with a significant holding, although it is possible that ValueAct has loaned out its stake or is otherwise holding it indirectly.

More stories like this are available on bloomberg.com

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Published: 10 Apr 2024, 05:57 AM IST

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