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A vital lifeline
Still, accepting Seven & i’s takeover seems far-fetched, as the size of the deal would far exceed previous foreign acquisitions of Japanese companies. Seven & i is not an obscure parts maker but a very familiar and well-liked brand that is present in every county in the country and visited by about 20 million people (one-sixth of the country’s population) every day.
7-Eleven is also a pioneer in the convenience store sector: it pioneered the sale of rice balls in the 1970s and has developed a range of cheap, fresh and nutritious food with just-in-time inventory management. It allows customers to pay bills or withdraw cash at any time, breaking the monopoly of banks that close at 3pm and on weekends.
From launching affordable fresh coffee to its recent plans to compete with Domino’s Pizza in takeaway delivery, Seven continues to make its stores more indispensable. Convenience stores are now seen as a vital lifeline by locals and authorities in times of disaster.
But none of that impressed investors. The company has made a series of changes since it first clashed with activist shareholders since Third Point founder Dan Loeb bought a stake in 2015. It installed current CEO Ryuichi Isaka, a Loeb favorite, scaled back its supermarket business, sold the Sogo-Seibu department store chain and launched a share buyback.
But even so, the stock is still trading at about the same level as before Loeb announced his stake. Dissatisfaction with recent market performance led ValueAct Capital Management to try to oust Isaka.
Management’s most recent move has been to aggressively expand its convenience store business in the U.S., where the company believes it can profitably introduce Japanese-style food options. As the offer came, there were concerns that the situation would be the exact opposite in its home country — where convenience stores still account for more than 40% of Seven & i’s operating profits — and that the Couche-Tard acquisition would instead result in a subpar experience.
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