Shareholder Pushes Seven & i to Engage With Couche-Tard

(Bloomberg) — A shareholder in Japan’s Seven & i Holdings Co. is pressuring the company to engage “more deeply” with Alimentation Couche-Tard Inc. over its $47.5 billion buyout approach.

“The Board has taken several decisions that leave significant unanswered questions,” Artisan Partners Asset Management Inc.’s portfolio managers N. David Samra and Benjamin L. Herrick said in a letter to Seven & i’s board on Sunday. The money manager owns stakes of roughly 1% in both the company and Couche-Tard, according to data compiled by Bloomberg.

“Those questions revolve around potential conflicts of interest and failure to pursue the path that offers the best future for the company and maximizes value,” they said. Seven & i couldn’t immediately be reached for comment outside regular business hours.

Couche-Tard, the Canadian convenience store and gas station operator that owns the Circle K brand, proposed last year to purchase the parent company of 7-Eleven for $18.19 per share.

Seven & i has been fending off the approach by pursuing an overhaul of the company to unlock shareholder value. It announced last week sweeping changes, including board director Stephen Dacus taking over as chief executive officer, the sale of its superstore business for $5.4 billion, a share buyback program worth ¥2 trillion ($13.5 billion) and a listing of its US business.

Artisan Partners, which has for months been urging negotiations between the two parties, said there are “serious questions” about Dacus’ role as chairman of the special committee overseeing Couche-Tard’s bid, and as he served on the nomination committee “while his own role at the company was under consideration.” 

“Minimum” corporate governance standards would have demanded that Dacus resign from both of these committees, the investor said. 

“Shareholders can have no confidence that the special committee has run, nor continues to run, a thorough evaluation process,” said Artisan Partners, adding that the firm is likely to vote against Dacus and other board members at the next annual general meeting, depending on Seven & i’s answers.

The Japanese and Canadian retailers said in separate statements last week that they were working together on a potential divestiture of US stores to overcome antitrust hurdles, if a takeover becomes the best option.

Investors have yet to be convinced, with Seven & i’s stock price trading more than 20% below Couche-Tard’s offer. Artisan said that “given the company’s poor performance in North America, we as shareholders again encourage the special committee to fully and meaningfully engage with Couche-Tard, a company with a proven track record of operating excellence.”

Bloomberg News reported that Couche-Tard has yet to sign a non-disclosure agreement that would give the Canadian company access to detailed financial information that its board believes is necessary to make a formal binding offer, a common step in such negotiations.

Couche-Tard executives, including founder and chairman Alain Bouchard, will visit Tokyo this week to try and advance discussions with Seven & i, and are also planning to hold a news conference on March 13 to publicly present their case for buying the company.

(Updates to show Seven & i couldn’t immediately be reached for comment. An earlier version corrected Artisan Partner’s holdings in Couche-Tard.)

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