Jinjoo Lee
Appearances
The Journal.
The Fight for 7-Eleven
Hmm. I don't know if magical is quite the word. Exciting, maybe?
The Journal.
The Fight for 7-Eleven
It's a brand that people really trust, and it's a place that people regularly frequent. you know, for lunch, dinner, breakfast. If you go on YouTube and if you search for 7-Eleven Japan, you'll see so many raving reviews.
The Journal.
The Fight for 7-Eleven
You can tell there's a lot of care taken in the quality of things. Like, they work with this, like, rice master in Kyoto to select the best varietal of rice for their rice balls, for instance. For potato salads, they designed a... specific peeler that removes like the thinnest layer of potato skin possible so that they could really enhance the flavor.
The Journal.
The Fight for 7-Eleven
So yeah, 7-Eleven is a brand that's really loved by Japanese people. They really trust the quality of what 7-Eleven sells.
The Journal.
The Fight for 7-Eleven
So if you think about convenience stores in the U.S., They sell fuel, they sell cigarettes, they sell food. And fuel is a category that's sort of going to decline over time. Cigarettes, that's already a declining business. Food is where the profits are at.
The Journal.
The Fight for 7-Eleven
So Couchetard wants to improve their food offerings. 7-Eleven has the expertise from Japan, and that would be very valuable. Just because they have a track record of running a very successful fresh foods business.
The Journal.
The Fight for 7-Eleven
CouchTard approaches 7-11 first in August, and they offer about $39 billion. And Seven and I rejected that offer and basically said, and this is in their words, they said the price was grossly undervaluing the company. And they also said there would be multiple regulatory barriers, particularly in the U.S.
The Journal.
The Fight for 7-Eleven
If you're a shareholder of Seven and I, then you would want the company to seriously entertain the deal. unless the company can come up with a better plan that can bump the company's stock even more.
The Journal.
The Fight for 7-Eleven
They came up with an offer to take the company private for $58 billion.
The Journal.
The Fight for 7-Eleven
You know, are they just like posturing just to try to get Kushitar to bid something higher? Yeah. Or are they so averse to a foreign takeover that they are willing to put up that amount of money?
The Journal.
The Fight for 7-Eleven
So from the perspective of 7-Eleven's current management, they might be skeptical that a foreign company with zero experience in Japan could run the business successfully. So can a Canadian company really understand the nuances of Japanese consumer preference and how to run a convenience store in Japan?
The Journal.
The Fight for 7-Eleven
And then there's also a general reluctance to sell a company that's kind of so core to their culture and to their everyday lives.
The Journal.
The Fight for 7-Eleven
because if a foreign company can successfully buy Japan's largest convenience store chain, does that sort of open the door for other corporate crown jewels to get sold to the highest foreign bidder?
The Journal.
The Fight for 7-Eleven
It really started with former Prime Minister Shinzo Abe in the early 2010s. And they introduced measures to try to make companies more shareholder friendly. They try to like nudge companies to require like more independent oversight of company executives to try to improve returns. Most recently, the
The Journal.
The Fight for 7-Eleven
The largest stock exchange in Japan came out and said, hey, if your stock price gets too cheap, then you have to submit a plan to us outlining how you're going to increase your valuation.
The Journal.
The Fight for 7-Eleven
Well, you want more investors coming in, right? You don't want your stocks to be undervalued. It also contributes to, you know... A lot of Japanese citizens own shares in these companies. You would want their wealth to increase. They're trying to make the stocks that are listed on there more attractive so that they can attract more investment.
The Journal.
The Fight for 7-Eleven
Well, I guess one way to read this is buyout proposal is that Japanese companies really haven't changed that much. You know, like that they would rather do this risky, expensive deal to keep this crown jewel in their own hands. But actually, I think it's a good sign because a very bad sign would have been if Seven and I just kept rejecting the takeover proposal and didn't do anything about it.
The Journal.
The Fight for 7-Eleven
But the fact that they're offering this alternative counterbid is a sign that they feel pressure to act on behalf of shareholders.
The Journal.
The Fight for 7-Eleven
Well, we'll have to see what CouchTard comes back with. You know, there's, I guess, three potential scenarios. Either CouchTard comes out with a stronger offer. And 7-Eleven is sold to CouchTard or management does its buyout and then the company goes private. And the third option is that they reject CouchTard.
The Journal.
The Fight for 7-Eleven
The management buyout doesn't go through and the company just says, OK, we're just going to continue on this path. We're not selling to anybody anymore. But in that case, it may be hard to fend off disgruntled investors. The company would really have to prove that they can deliver superior returns.