Daniel Loeb's Third Point picks stake in Seven & I

By Money Times

Nov 03, 2015 01:54 AM EST

The US activist investor Daniel Loeb has bought a stake in a Japanese retailer Seven & I Holdings. Though the details about stake and valuation are not revealed, Loeb-run hedge fund Third Point is believed to have acquired stake below five percent. After the sale, the Japanese retailer is expected to take up restructuring exercise enhance profitability, reducing underperforming merchandise stores. Seven & I Holdings operates over 18,000 outlets under the brand 7-Eleven across Japan. Seven & I has decided to shut about 40 unprofitable Ito Yodado stores in the next five years.

After the stake sale news, Seven & I shares rose on Tokyo Stock Exchange as investors reacted positively with hopes that the New York-based Third Point will bring in necessary changes at 7-Eleven convenience store operator. Third Point didn't divulge any information on stake buying. 

The equity-friendly policies are being implemented after Shinzo Abe becoming the Prime Minister. Japan's equity policies were under pressure for decades and now it's opening up. Loeb is a known investor to the Japanese financial markets.

Third Point LLC has also proposed to offload the supermarket unit of Seven & I Holdings. In a communication to investors, Third Point said that it would continue to increase investment in Seven & I. 

Ito-Yokado Co, a unit of Seven & I Holdings is suffering from losses as it continues to record underperformances. Third Point has suggested the Japanese retailer to spin it off and restructure it as a standalone one. Shinzo Abe's measures to enhance corporate governance have opened gates for activist investors. 

The new steps taken by the Japanese government are attracting fresh investment into the domestic market and helping local firms improve operational capability. The latest buying stake in Seven & I Holdings is the fifth investment for Loeb in Japan. He has invested earlier in Suzuki Motor Corp, Fanuc Corp, a robot maker, Sony Corp and IHI Corp, a manufacturer of jet engines.

Third Point further stated in the letter that "shareholders have suffered from the subsidization of Ito-Yokado for so long that Seven & i is emerging as one of the most crucial tests for the success of corporate governance reform in Japan." 

Loeb earlier offered a bid for Sony, but couldn't conclude it. His investment and efforts resulted in improvement of performance of Fanuc and doubling of dividend payout from Pledge. Loeb has called for restructuring exercise 7-Eleven to increase profitability and shareholder returns while reducing underperforming general merchandise stores.

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