Dive Brief:

• The two top proxy advisory firms in the world, Institutional Shareholder Services and Glass, Lewis & Co., have backed ValueAct’s proposal to replace four board members at Seven & i, the parent company of 7-Eleven Inc. and 7-Eleven Japan, who are up for a vote at its next shareholder meeting on May 25, according to a ValueAct press release and a report from Reuters.
• ValueAct, an activist investment firm that owns 4.4% of Seven & i’s shares, has pushed the global convenience retail giant to make the changes, including replacing president and longtime executive Ryuichi Isaka, due to what it sees as underperformance the company.
• Proxy advisory companies like ISS and Glass Lewis do research for institutional investors. They can also provide recommendations on matters up for vote, and can even place votes for shareholders if empowered to do so.

Dive Insight:

ISS and Glass Lewis backing ValueAct could add considerable weight to the investor’s proposal, which Seven & i has rejected up until this point. While there is no direct information on how many Seven & i shares the firms have influence over, the two companies are estimated to cover about 90% of the proxy advisory services market.

The push to replace the selected board members, along with the investor’s stated intent to reaffirm six new independent outside directors who were added in 2022, follows ValueAct’s earlier proposal of spinning off Seven & i’s c-store segments into their own company, leaving the rest of the underperforming retail assets separate.

“ValueAct estimates that over 10 years the 100% spinoff of 7-Eleven capital restructuring would result in shareholder value that is 80% higher than maintaining the current conglomerate structure,” according to a letter from ValueAct quoted by Reuters.

A spinoff would separate the convenience store segments from Ito-Yokado and York-Benimaru, two Japanese grocery store chains; and Seven & I Food Systems, a foodservice company that operates several restaurant chains and provides contract foodservice for hospitals and schools. 

ValueAct has nominated Katsuya Natori, Dene Rogers, Ronald Gill and Brittni Levinson. They would replace Isaka along with Vice President Katsuhiro Goto and members Kunio Ito and Toshiro Yonemura. Ito is retiring at the shareholder meeting.

"The company's strategic plan, basically designed by insiders and ratified by the full board ... leaves execution to the same management under the same corporate culture,” said ISS in its note. “Given the long-term track record, this is not reassuring for investors."

ValueAct indicated it will also vote to re-elect the four inside directors in charge of major businesses and group functions in order to maintain operational continuity.

Seven & i is putting forward Isaka, Goto and Yonemura for re-election, and has nominated Shinji Wada and Fuminao Hachiuma to replace Ito and fill a seat that was vacated late in 2022.