Seven & i Holdings Co. is making strategic moves to streamline its business by seeking buyers for its Ito-Yokado stores and supermarkets. This decision comes as the company faces a potential takeover approach from Canada’s Alimentation Couche-Tard Inc. The Japanese retail giant aims to enhance its focus on the convenience-store sector, particularly its flagship 7-Eleven brand.
Shifting Focus to Convenience Stores
Seven & i is reaching out to private equity funds and other interested parties to sell parts of its supermarket empire. This includes iconic brands like Ito-Yokado and specialized stores such as Shell Garden and York-Benimaru. The company estimates the sale could bring in between ¥320 billion and ¥430 billion ($2.2 billion to $2.9 billion), based on current earnings multiples.
- Target Buyers:
- Private equity firms
- Strategic retail investors
- International conglomerates
This strategic pivot underscores Seven & i’s commitment to strengthening its core business. By divesting non-core assets, the company hopes to command a higher valuation and position itself better against takeover bids.
Financial Implications of the Sale
The sale of these supermarket units is not just about raising capital; it’s also about reshaping the company’s financial landscape. Seven & i plans to retain a minority stake in the sold entities, ensuring ongoing influence and potential future benefits.
| Business Segment | Operating Profit (¥ Billion) |
|---|---|
| Supermarkets | 13.5 |
| Overseas Convenience | 301.6 |
| Domestic Convenience | 250.5 |
| Standalone Value | 232.4 |
The supermarkets’ operating profit stands at ¥13.5 billion, significantly lower than the convenience stores’ ¥301.6 billion overseas and ¥250.5 billion domestically. This disparity highlights the profitability challenges within the supermarket segment compared to the booming convenience store business.
Navigating the Takeover Interest
Alimentation Couche-Tard’s interest in Seven & i has accelerated the company’s restructuring plans. After rejecting an initial offer from Couche-Tard as undervaluing the company, Seven & i is now actively seeking alternative buyers to maximize shareholder value.
“Discussions are still at an early stage and may be called off,” a source revealed. Despite the ongoing negotiations, Seven & i remains steadfast in its strategy to enhance the valuation of its convenience store operations.
Future Outlook and Strategic Plans
Looking ahead, Seven & i is set to report its quarterly results on October 10, marking the first update since Couche-Tard’s takeover proposal became public. Investors are keen to see how these strategic sales will impact the company’s financial performance and overall market position.
For years, shareholders have urged Seven & i to concentrate more on its profitable convenience store business. With this latest move, the company appears to be aligning its operations with investor expectations, potentially paving the way for sustained growth and stability.
