As much as Jun Nagao doesn’t like the idea of foreigners scooping up Japanese companies, the former 7-Eleven franchise owner thinks a takeover would bring welcome change to the retail giant where he spent decades.
Nagao, who until last year owned a 7-Eleven convenience store in Gunma, north of Tokyo, says years of strategic missteps left parent Seven & i Holdings (3382.T), opens new tab ripe for a $38.5 billion bid from Canada’s Alimentation Couche-Tard (ATD.TO), opens new tab last month.
He is not alone in his criticism. Reuters also spoke to nine current 7-Eleven franchisees in Japan, almost all of whom voiced disapproval of Seven & i’s strategy and welcomed the proposed buyout by Circle-K owner Couche-Tard.
While Seven & i has rejected the bid, Couche-Tard has said it remains interested. The deal would be the biggest-ever foreign acquisition of a Japanese company and would boost the Canadian retailer’s economies of scale.
Seven & i has been a market laggard. In the five years to mid-August, just before the bid was unveiled, its shares rose 60% including dividends while the benchmark Nikkei index (.N225), opens new tab more than doubled.
Japan and the U.S. account for around two-fifths of the 85,000 7-Eleven stores worldwide. The Japan business is smaller by sales, but highly profitable, with operating margins of 27% versus an average of 3.5% outside the country.
Owners are key to Seven & i’s lucrative domestic convenience store business and some are also shareholders. Some of the owners’ comments to Reuters show issues previously raised by U.S. activist fund ValueAct Capital and other investors about 7pay and the need for a governance overhaul are shared by other stakeholders.
To be sure, the owners Reuters interviewed are not a comprehensive sample of the more than 21,000 franchised stores in Japan. Seven & i does not disclose the number of owners, and almost all of those who spoke to Reuters declined to be identified in order to speak openly.
In response to questions from Reuters, Seven & i said through support measures for 7-Eleven stores and communication with owners it was “constantly striving” towards sustainable growth of its stores and creating a “safe and secure management environment”.
It would continue to work closely with franchisees to grow together, it added.
