Third Point warns Seven & I on nepo­tism for next CEO

The Pak Banker - - COMPANIES/BOSS -

Third Point LLC's bil­lion­aire founder Daniel Loeb has made Seven & i Hold­ings Co. his lat­est tar­get for crit­i­cism of man­age­ment suc­ces­sion plan­ning, warn­ing the Ja­panese gro­cery and re­tail group against letting nepo­tism de­ter­mine its next chief ex­ec­u­tive of­fi­cer.

Seven & i CEO Toshifumi Suzuki, 83, is hav­ing chronic health prob­lems and in­vestors fear he may try to name his son, Ya­suhiro Suzuki, to lead Seven?Eleven Ja­pan and even­tu­ally be­come pres­i­dent of Seven & i, Loeb wrote in a let­ter to the com­pany dated Sun­day. Ryuichi Isaka, the cur­rent pres­i­dent of Seven?Eleven Ja­pan, should be a lead­ing can­di­date for the po­si­tion, and in­stead may be de­moted, Loeb said.

"The cri­te­ria used to de­ter­mine the next CEO should be com­pe­tence and the abil­ity to run this com­pany suc­cess­fully, not fam­ily ties or pre­serv­ing the Suzuki fam­ily dy­nasty," Loeb said in a phone in­ter­view on Sun­day. Loeb, who first dis­closed Third Point's in­vest­ment in Seven & i in Oc­to­ber, has built a rep­u­ta­tion for con­fronting boards over changes in man­age­ment, in­clud­ing wag­ing bat­tles with Dow Chem­i­cal Co. and auc­tion­eer Sotheby's. His crit­i­cism of Seven & i con­trasts with his laud­ing of Prime Min­is­ter Shinzo Abe's push to im­prove cor­po­rate gover­nance in Ja­pan by en­cour­ag­ing bet­ter de­ploy­ment of cash and re­turns for in­vestors. Loeb's crit­i­cism of the com­pany's suc­ces­sion plan­ning is "re­gret­table," Hiro­take Henmi, a spokesman for Seven and i, said on the phone Mon­day. Suzuki, the CEO, comes into the of­fice daily to work, he said.

"We've been re­view­ing the busi­nesses in a se­vere en­vi­ron­ment and we will push for­ward with the re­struc­tur­ing plan that we an­nounced on March 8," he said, re­fer­ring to the com­pany's an­nounce­ment to close two stores of re­tail­ers Sogo & Seibu Co. in Septem­ber and 20 Ito?Yokado Co. general mer­chan­dise shops in fis­cal 2016.

Loeb's Seven & i in­vest­ment was at least his fifth in two years in Ja­pan and fol­lowed his dis­clo­sure of bets on Suzuki Mo­tor Corp., robot maker Fanuc Corp., Sony Corp. and jet-en­gine maker IHI Corp.

"Our goals are fully con­sis­tent with the third ar­row of Abe­nomics: a fo­cus on share­holder in­ter­ests and re­turns, and en­gage­ment in for­ward­look­ing cor­po­rate gover­nance that should make Ja­panese com­pa­nies more com­pet­i­tive and at­trac­tive in­vest­ment op­por­tu­ni­ties," Loeb wrote in the let­ter.

Seven & i gained al­most 2 per- cent to 4,911 yen at Mon­day's close in Tokyo trad­ing as the bench­mark Topix index ad­vanced 1.2 per­cent. The com­pany's shares have de­clined 8.6 per­cent since Oct. 26, the last day of trad­ing be­fore Ja­panese news­pa­pers Kyodo and Nikkei first re­ported Third Point's in­vest­ment. Third Point hasn't dis­closed the num­ber of shares it holds.

Un­der Isaka, 58, Seven-Eleven Ja­pan earned a record 223.3 bil­lion yen ($1.97 bil­lion) in op­er­at­ing in­come dur­ing the last fis­cal year. The com­pany forecast Seven-Eleven Ja­pan would earn a record 235 bil­lion yen op­er­at­ing profit for the year ended Feb. 29.

Third point said ru­mors that Isaka will be re­moved from man­age­ment are cause for "sig­nif­i­cant con­cern" and that he should be re­warded, rather than de­moted. Kazuki Fu­ruya, a Seven-Eleven Ja­pan manag­ing ex­ec­u­tive of­fi­cer, may be­come in­terim pres­i­dent of Seven-Eleven as part of Toshifumi Suzuki's plans to make Ya­suhiro Suzuki the next pres­i­dent of the com­pany, Loeb wrote.

"I am con­fi­dent that the board rec­og­nizes its fidu­ciary duty is to all the share­hold­ers and other stake­hold­ers of Seven & i and not to cre­ate a dy­nasty for the Suzuki fam­ily by hir­ing a care­taker man­ager who will later el­e­vate Mr. Suzuki's son," he wrote. In ad­di­tion to tak­ing a po­si­tion on CEO suc­ces­sion, Third Point said Seven & i should shrink and re­struc­ture its Ito?Yokado unit and di­vest re­tail­ers Sogo & Seibu, Bar­ney's Ja­pan, and Nis­sen Hold­ings Co. Loeb wrote that the com­pany should fo­cus on op­er­at­ing con­ve­nience stores, which gen­er­ated 45 per­cent of its 6.04 tril­lion yen in rev­enue for the 2015 fis­cal year.

Third Point has spo­ken to other Seven & i in­vestors who share the ac­tivist hedge fund's views on man­age­ment suc­ces­sion, Loeb wrote. Third Point looks for­ward to "con­tin­u­ing our con­struc­tive di­a­logue with the com­pany," and has "no wish to cre­ate a pub­lic dis­pute at a fu­ture An­nual General Meet­ing, but of course are will­ing to do so in or­der to pro­tect our in­vest­ment," the bil­lion­aire wrote in his let­ter.

Loeb's ac­tivist tone with Seven & i fol­lows his un­suc­cess­ful bid to get Suzuki Mo­tor to can­cel all of the shares the au­tomaker bought back last year from Volk­swa­gen AG fol­low­ing their un­suc­cess­ful al­liance. Al­though Suzuki said ear­lier this month it would can­cel most of the stock re­pur­chased from VW, it also said it would sell 200 bil­lion yen of con­vert­ible bonds, a move Loeb told re­porters in Au­gust that the com­pany should avoid.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.