[Reuters Breakingviews] Seven & i’s latest revamp leaves stale aftertaste

HONG KONG, March 7 (Reuters Breakingviews) - Seven & i 3382.T needs a better narrative. On Thursday, the Japanese owner of corner-store empire 7-Eleven unveiled the second attempt at an alternative plan to rival Alimentation Couche-Tard’s ATD.TO $47 billion takeover offer in the form of a 2 trillion yen ($13.5 billion) buyback over the next five years, funded by deals already in the mix: the sale of its supermarket business to Bain Capital for almost 815 billion yen, and listing its North American convenience store unit, which could raise at least 1 trillion yen.

The firm also confirmed the appointment of Steven Dacus, currently its lead independent director who ran the special committee set up to evaluate takeover offers, to replace CEO Ryuichi Isaka from May 27. He said Seven & i was still engaging with Couche-Tard but could not afford to enter a deal and then sit on its hands for years, only to have the merger scuppered by U.S. antitrust regulators.

It's a valid concern, but handing so much money back to investors suggests Seven & i doesn’t have any better idea of how to spend it. If the firm wants to fend off its Canadian rival, it needs to lay out a bold plan to boost returns at its North American convenience store business where the potential gains are greatest.

Dacus, though, seems to be cleaving to continuity with his predecessor, suggesting a drive already underway to improve food quality at those stores will ultimately do the trick.

Markets shrugged. Shares in the company, which closed 6% higher on Thursday on media reports of the buyback, shed about 1% on Friday. That left the stock down more than 15% this year - and 21% below Couche-Tard's proposal, at current exchange rates - thanks largely to the collapse of the take-private plan the company’s founding family floated as a way to fend off its Canadian suitor.

Dacus has, at least, finally added some detail to Seven & i's antitrust concerns: for a tie-up to pass muster with Washington it would require selling "in excess of 2,000" stores. He called that "unprecedented", though it also works out to just 9% of the two companies' North American shop fronts. Couche-Tard is already courting potential buyers, Reuters reported on Friday.

If the challenges Seven & i face are serious enough to warrant the first change of leadership in nine years, they are serious enough to require a more substantial change in strategy. Couche-Tard remains the only party offering such a shake-up.

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CONTEXT NEWS

Seven & i on March 6 announced a 2 trillion yen ($13 billion) share buyback by the 2030 fiscal year funded by selling its supermarket business to Bain Capital for 814.7 billion yen and a planned listing of its North American convenience store subsidiary in 2026, which is expected to raise at least 1 trillion yen.

Seven & i said it would “continue to constructively engage” with Canada’s Alimentation Couche-Tard on its $47 billion takeover proposal.

The operator of 7-Eleven convenience stores also named Stephen Dacus, lead independent director and head of the special committee that was evaluating takeover offers, to replace CEO Ryuichi Isaka from May 27.

Graphic: Collapse of founding family's buyout bid weighs on Seven & i shares