SEVEN & i Holdings, the convenience-store operator facing a takeover approach from Canada’s Alimentation Couche-Tard, is exploring the sale of part of its stake in Seven Bank, people with knowledge of the matter said.
The move is intended to show the retailer is willing to focus more on its core 7-Eleven business, said the people, asking not to be identified because the plans are not yet public. The bank, which has become an important part of the retailer’s business in Japan over the past two decades, would no longer be accounted for as a subsidiary, the people added. Deliberations are ongoing and a final decision has not been made, one of the people said.
Seven & i is facing pressure to show that it can command a higher valuation for its business, whether in negotiations or through its own efforts. The seven-Eleven owner asserted last month that Couche-Tard’s initially indicated offer of US$14.86 a share did not fully reflect the company’s worth.
A representative for Seven Bank declined to comment. A spokesperson for Seven & i was not immediately able to comment.
Seven & i controls roughly 46 per cent of Seven Bank, including shares held by other group companies, a stake worth about 153 billion yen (S$1.4 billion). While the financial business that includes Seven Bank makes up 7.1 per cent of Seven & i’s operating profit, it brings in more cash than the superstore business.
The Japanese retailer plans to report quarterly results Oct 10, the first since Couche-Tard’s proposal became public. Seven & i’s shares have climbed a relatively modest 4.7 per cent since then.
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Seven & i said in April that it is considering a listing of Ito-Yokado, the company’s original retail operation, and eventually split it off from the more profitable and faster-growing 7-Eleven franchise. But that process, which could even result in an initial public offering of the unit, could take years and may not be enough to put Seven & i on a stronger footing in negotiations.
Seven Bank was founded in 2001 to offer banking services 24 hours a day, 365 days a year, using ATMs in 7-Eleven stores at a time when most banks operated under limited hours. Since then, it has become a key part of the group’s business, with about 27,000 machines across Japan, 16,500 overseas and tie-ups with 640 other financial institutions.
For years, Seven & i has faced calls from investors to focus more on its convenience-store business. ValueAct Capital Management has argued in the past that seven-Eleven alone could be worth much more as a standalone company.
In its letter to Couche-Tard on Sep 6, Seven & i described the Canadian company’s approach as “opportunistically timed and grossly undervalues our standalone path and the additional actionable avenues we see to realise and unlock shareholder value in the near- to medium-term.” BLOOMBERG
