Japan's Seven & i unveils restructuring plan as $47 billion Couche-Tard bid looms

By Anton Bridge

TOKYO (Reuters) -Seven & i Holdings announced on Thursday a roadmap to hive off underperforming businesses and focus on its convenience store operations, as the retailer aims to fend off a $47-billion takeover bid from Canada's Alimentation Couche-Tard.

The Japanese operator of 7-Eleven stores is facing pressure to convince investors it can enhance value after having rejected Alimentation Couche-Tard's (ACT) first bid in August, which it said undervalued the company and its growth potential.

Seven & i said on Thursday it will bundle some of its vast network of non-core assets into a holding company for which it will bring in strategic investors. The parent company also plans to rename itself '7-Eleven Corp' to emphasise the focus on its profitable convenience stores.

The new holding company, to be called York Holdings, is set to house 31 subsidiaries, including the group's superstores business, general goods store Loft, baby goods store Akachan Honpo and the operating company of Denny's (NASDAQ:DENN ) restaurants in Japan.

Seven & i aims for the new company to become an equity method affiliate by February 2026, with an initial public offering planned for some time thereafter.

Despite divestments of some non-core holdings, such as department store unit Sogo & Seibu last year, Seven & i's operations remain expansive.

Foreign investors such as U.S.-based Artisan Partners (NYSE:APAM ) have called on the group to shed what they see as unnecessary bloat.

"They are making a clear delineation between core and non-core businesses and that's a good thing," said Travis Lundy of Quiddity Advisors, who publishes on Smartkarma.

But it remains to be seen whether Seven & i's latest moves will satisfy critics calling for the sale of underperforming assets.

"Going forward each business will follow its own growth story," Seven & i Chief Executive Ryuichi Isaka told a briefing, but added that Seven & i would retain a minority stake in York Holdings to continue to collaborate on food product development.

ACT has upped the ante with a revised offer that values Seven & i about 22% above its August initial bid, two sources said on Wednesday.

On Thursday Seven & i gave no additional details on ACT's revised bid but Isaka said the growth and capital efficiency plans unveiled would create more value than what was proposed by Couche-Tard.

Seven & i also revised down its earnings forecast on Thursday, predicting a drop in operating profit for the fiscal year ending February 2025 to 403 billion yen ($2.7 billion) from 545 billion.

The drop is driven by a decrease of 24.6% in forecast profit from its convenience store business in North America, as inflation weighs on consumer spending.



Seven & i’s overseas convenience store business accounts for more than 75% of its consolidated revenue.

($1=149.1700 yen)

Source: Investing.com