© Reuters. FILE PHOTO: A man uses a mobile phone in front of a 7-Eleven supermarket in Tokyo, Japan, Dec. 6, 2017. REUTERS / Toru Hanai
By Svea Herbst-Bayliss
(Reuters) – Activist investor ValueAct Capital has acquired a $ 1.53 billion stake in Seven & i Holdings and is urging the Japanese owner of the 7-Eleven convenience store chain to make changes, including a possible liquidation, in To consider.
ValueAct told investors Wednesday in a letter it saw on Reuters that it had built a 4.4% stake in Seven & i and believed that the sum of its parts was worth much more than its current market value.
The hedge fund said the 7-Eleven store could be worth more than twice what its parent company is currently valued if the company restructures to focus on convenience stores or if 7-Eleven is outsourced .
7-Eleven’s convenience stores are a consistent high-yielding business, while Seven & i’s other retail and financial assets, such as real estate, have not added cash flow recently despite being backed by valuable assets, the firm said.
“We have invested in Seven & i Holdings at an estimated P / E of 11 times while global peers are trading at 15 to 25 times,” ValueAct said in the letter.
Seven & i did not immediately respond to a request for comment.
The new stake in Seven & i marks a return to Japan for ValueAct, where shareholder activism is growing and the company has considerable experience, having invested in Nintendo last year and previously betting on Olympus and JSR.
ValueAct underscored the role 7-Eleven could play for Japan in the letter, arguing it could become what McDonalds and Starbucks (NASDAQ 🙂 are to the US Inditex (MC 🙂 is in Spain and Aldi is in Germany. Transformation could create a “21st century world champion” that provides jobs and innovation in its industry, ValueAct said.
However, work is needed to achieve those goals, ValueAct said, noting that 7-Eleven needs to accelerate its global digitization strategy. In the US, it could focus more on foods that can be quickly tailored to taste and cut business costs, the company suggested.
Over the past few months, ValueAct has worked with the board members and management of Seven & i and is “optimistic” that it can continue to build trust and alignment with the company, the letter said.
ValueAct, operated by Mason Morfit, has risen 18% since January 2021 after returning 12.5% last year, an investor in the company said.
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