VALUEACT TAKES STAKE IN 7-ELEVEN OWNER, MAY SEEK FIRM’S BREAK-UP

Activist investor ValueAct Capital has amassed a $1.53 billion stake in Seven & i Holdings and would like the Japanese owner of the 7-Eleven convenience store chain to consider changes, including a potential break-up, Svea Herbst-bayliss reported for Reuters.

ValueAct told its investors on Wednesday in a letter seen by Reuters that it built a 4.4% stake in Seven & i and believes that the sum of its parts is worth much more than its current market value.

The hedge fund said the 7-Eleven business could be worth more than double what its parent is currently valued at if the company restructures itself to focus on the convenience stores or if 7-Eleven is spun out.

The new stake in Seven & i marks a return to Japan for ValueAct, where shareholder activism is gaining traction and the firm has considerable experience, having made an investment in Nintendo last year and having previously bet on Olympus Corp. and JSR Corp. Seven & i last year spent $21 billion to buy the Speedway convenience stores.

7-Eleven's convenience stores are a consistent, high-return business, while Seven & i's other retail and financial assets, such as real estate have not contributed to cash flow of late even though they are backed by valuable assets, the investment firm noted.

"We invested in Seven & i Holdings at an estimated P/E ratio of 11 times, while global peers trade at 15 times to 25 times," ValueAct said in the letter. The company's shares that are traded in the United States climbed 4% on a day the broader market is down. Seven & i did not immediately respond to a request seeking comment.

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