The Japanese parent of 7-Eleven will shed much of its non-convenience business and refocus on its core brand, the company said Thursday, as it seeks to stave off an increasingly aggressive takeover effort by Alimentation Couche-Tard Inc.
Seven & i Holdings Co. said it plans to change its name to 7-Eleven Corp. and move peripheral businesses – including supermarkets and specialist chains focused on household and baby goods – to a new holding company, which will bring in outside investment ahead of a future IPO.
The change, which Seven & i said would “maximize corporate and shareholder value,” will be addressed at an annual meeting in May 2025, the company said in a note to investors.
Seven & i has been under intense pressure as it seeks to resist the Couche-Tard offer, which was already the largest potential foreign takeover in Japanese history before the Canadian conglomerate this week raised its bid by 22 per cent to roughly US$47-billion.
Last month, Seven & i said the initial Couche-Tard bid “gross undervalues” the company, adding it was better maximize shareholder value as a standalone business.
Results released Thursday undercut this however, showing year-on-year net profits down 35 per cent to 52.2 billion yen (US$350-million). This drop, measured to the six months ending August, was worse than analysts expected, and will likely renew calls for Seven & i to reconsider the takeover bid, news of which had sent its share price spiking.
Based on the latest figures, Seven & i cut its full-year profit forecast to 163 billion yen (US$1-billion), from 293 billion yen previously.
Speaking to investors Thursday, Seven & i President Ryuichi Isaka apologized “for the concern and inconvenience” caused by the poor results, adding the company had been “slow to respond to the changes in the environment and have caused great trouble in terms of our business performance.”
Company executives blamed inflation in Japan and the U.S. and changing consumer behaviour, particularly a faster-than-expected decline in cigarette sales.
Retail businesses are “subject to various different changes,” which sometimes act as headwinds and sometimes as tailwinds, Mr. Isaka said. “Since the beginning of the 2020s, I think everything has turned out to be a headwind.”
The Seven & i president barely mentioned the Couche-Tard acquisition offer, which was not touched on at all in the investor materials released Thursday or by any other speakers on the call, including the directors of 7-Eleven’s Japanese and U.S. businesses.
Mr. Isaka claimed Couche-Tard wished not to disclose the details of discussions between the two companies, but reporting by The Globe and Mail and other outlets has put the blame on Seven & i for not engaging seriously with its Canadian rival. Japanese companies have a history of resisting foreign takeovers and Seven & i’s apparent foot-dragging has already angered some investors.
Combining Circle-K and 7-Eleven locations in the United States would result in roughly 20,000 stores owned by the same company. That would make Couche-Tard the No. 1 player in that market by a substantial margin, with the next-largest being the 2,600-outlet Casey’s General Stores Inc. chain.
Analysts estimate the Canadian company would need to sell at least 1,000 locations in the U.S. in order to satisfy American regulatory concerns over Circle K and 7-Eleven joining forces.
Couche-Tard is the first foreign company to attempt the acquisition of a major Japanese business since Tokyo issued a new set of guidelines for mergers and acquisitions last year. Experts say the new guidelines are intended to make it easier for foreign buyers to get deals done in Japan and were issued in response to decades of criticism that Japanese corporate takeover rules were overly protectionist.
More discussion would also be required on the crucial role that Seven & i plays in everyday life in Japan across food retail, banking and other services, the Japanese company told Couche-Tard last month. In response, the Canadian company expressed a willingness to engage in those discussions.
“When entering new markets, Couche-Tard always takes a humble approach,” Couche-Tard said at the time. “We would respect how Seven & i operates in Japan.”
With files from Jameson Berkow and David Milstead