7-Eleven owner seeking to sell off part of stake in banking unit

Seven & I Holdings, the convenience-store operator facing a takeover approach from Canada’s Alimentation Couche-Tard, is exploring the sale of part of its stake in Seven Bank, people with knowledge of the matter said.

The move is intended to show the retailer is willing to focus more on its core 7-Eleven business, said the people, asking not to be identified because the plans aren’t yet public. The bank, which has become an important part of the retailer’s business in Japan over the past two decades, would no longer be accounted for as a subsidiary, the people added. Deliberations are ongoing and a final decision hasn’t been made, one of the people said.

Seven & I is facing pressure to show that it can command a higher valuation for its business, whether in negotiations or through its own efforts. The 7-Eleven owner asserted last month that Couche-Tard’s initially indicated offer of $14.86 a share didn’t fully reflect the company’s worth.

A representative for Seven Bank declined to comment. A spokesperson for Seven & I wasn’t immediately able to comment.

Seven & I controls roughly 46% of Seven Bank, including shares held by other group companies, a stake worth about ¥153 billion ($1 billion). While the financial business that includes Seven Bank makes up 7.1% of Seven & I’s operating profit, it brings in more cash than the superstore business.

The retailer plans to report quarterly results Oct. 10, the first since Couche-Tard’s proposal became public. Seven & I’s shares have climbed a relatively modest 4.7% since then.

Seven & I said in April that it is considering a listing of Ito-Yokado, the company’s original retail operation, and eventually split it off from the more profitable and faster-growing 7-Eleven franchise. But that process, which could even result in an initial public offering of the unit, could take years and may not be enough to put Seven & I on a stronger footing in negotiations.

Seven Bank was founded in 2001 to offer banking services 24 hours a day, 365 days a year, using ATMs in 7-Eleven stores at a time when most banks operated under limited hours. Since then, it has become a key part of the group’s business, with about 27,000 machines across Japan, 16,500 overseas and tie-ups with 640 other financial institutions.

For years, Seven & I has faced calls from investors to focus more on its convenience-store business. ValueAct Capital Management has argued in the past that 7-Eleven alone could be worth much more as a standalone company.

In its letter to Couche-Tard on Sept. 6, Seven & I described the Canadian company’s approach as “opportunistically timed and grossly undervalues our standalone path and the additional actionable avenues we see to realize and unlock shareholder value in the near- to medium-term.”