Artisan Partners International Value Team: Seven & i Restructuring Plan Is Designed to Impede ACT Bid

MILWAUKEE, Oct. 16, 2024 (GLOBE NEWSWIRE) -- The Artisan Partners International Value Team today sent a letter to the Board of Directors of Seven & i Holdings Co. Ltd. (“SIH” or the “Company”) urging the Company to respond without delay to the enhanced USD18.19 per share bid offered by Alimentation Couche-Tarde Inc. (“ACT”), a 22% premium over ACT’s initial bid.

In the past week SIH announced a restructuring plan proposed by shareholders over four years ago that management has resisted until now. The belated adoption of the restructuring plan, the letter states, is a tactic “designed to impede and drive away a bona fide bid.”

The International Value Team’s letter asks the SIH Board to “grant ACT access to conduct due diligence and to negotiate a purchase price that maximizes value for SIH shareholders without delay. The price currently being offered by ACT is clearly superior to the speculative value that could potentially be achieved by implementing the restructuring plan at this late date.”

The letter also asks the SIH Board to take measures to upgrade transparency and accountability. The team implores the Board to make public the names of the directors serving on the Special Committee that is reviewing the ACT bid. The team also requests that President Ryuichi Isaka and Managing Executive Officer Yoshimichi Maruyama step down from the Nomination Committee to provide greater neutrality and objectivity.

Finally, the International Value team suggests that the Compensation Committee make full disclosure of compensation practices for overseas executives and directors in keeping with standard best-in-class practice among SIH’s global peers.

The full text of the letter is as follows:

October 15, 2024

The Board of Directors
Seven & i Holdings Co. Ltd.
8-8, Nibancho, Chiyoda-ku
Tokyo 102-8452, Japan

To the Members of the Board:

We represent the Artisan International Value Strategy, a U.S. dollar (“USD”) 47 billion long-term value investing platform whose discretionary investment clients currently own over 1% of the outstanding shares of Seven & i Holdings Co. Ltd. (“SIH” or the “Company”). We have been shareholders of SIH since July 2019. As a signatory to Japan’s Stewardship Code, we are committed to promoting sustainable growth of companies through investment and dialogue. We are writing to help the Company achieve its goal of becoming a “world-class retail group” and help enhance corporate value.

In the past week, SIH announced a restructuring plan after over four years of urging by shareholders. This restructuring plan is too little, too late. It seems clear that SIH management finally adopted the plan not because management has suddenly realized the benefits of the restructuring it has long resisted, but because it will impede the bid by Alimentation Couche-Tarde Inc. (“ACT”) to acquire SIH.

We believe SIH’s corporate value is best served by positively engaging with ACT on the terms of its proposed acquisition. Reports suggest ACT has made a current offer of USD18.19 per share, a 22% premium to its initial offer. SIH shareholders are not well served by tactics designed to impede and drive away a bona fide bid.

We urge the Board of Directors to grant ACT access to conduct due diligence and to negotiate a purchase price that maximizes value for SIH shareholders without delay. The price currently being offered by ACT is clearly superior to the speculative value that could potentially be achieved by implementing the restructuring plan at this late date.

We note that the identities of the members of the Special Committee, other than the Chairman, have not been made public. This is highly unusual and invites suspicion that management-friendly members have been hand-picked to serve on the Special Committee. We request that the identities of the members of the Special Committee be made public to maintain accountability and in keeping with standard practice.

As additional measures to maintain accountability, we are making two requests related to the Nomination and Compensation Committees.

First, to facilitate an independent nomination process, President Ryuichi Isaka and Managing Executive Officer Yoshimichi Maruyama should step down from the Nomination Committee immediately. None of the executive directors should be part of the Nomination or Compensation committees. In conjunction with this change, we expect the Board to prioritize ongoing succession planning and recruitment activities to attract world-class retail managers.

Second, given the extraordinary compensation awards to executives in the face of poor capital allocation and below-average operating performance, we request a review of required disclosure by the Compensation Committee. We provided our detailed analysis of the Company’s compensation plan in our letter to the Board dated 9 July 2024. SIH should disclose the overseas executive compensation approval process, performance metrics and weightings along with relevant industry benchmarks and an explanation for management’s unusually low equity ownership. This information is readily available for the Company’s U.S. competitors through public filings and is considered standard practice amongst best-in-class, globally competitive organizations.

SIH has chronically suffered from ineffective oversight and accountability, resulting in a persistent valuation discount. At a critical juncture in its history, we encourage you to ensure fair, independent and transparent processes to maximize shareholder value.

Sincerely,

N. David Samra                      Benjamin L. Herrick                
Portfolio Manager                 Associate Portfolio Manager

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eileen.kwei@artisanpartners.com

source: Artisan Partners Asset Management Inc.