For three years, Stephen Dacus was one of the most powerful people behind the scenes at Seven & i, the Japanese convenience store giant.
Now he has been propelled firmly into the spotlight, named as chief executive and charged with working out how to respond to a $47bn takeover attempt by Canada’s Alimentation Couche-Tard, owner of the Circle K brand.
As the decision for him to replace Ryuichi Isaka as Seven & i’s first foreign boss was made public last week, Dacus told the story of how, as a child in California, he had worked night shifts at his father’s 7-Eleven store, a core part of the Japanese group.
“As a teenager, I hated having to work the midnight shift on Friday and Saturday nights when my friends were having fun . . . I had no way of knowing that nearly 50 years later, I would be selected to run the global parent company of my father’s small store,” the 64-year-old US national said.
It was an attempt to whittle the story of a sprawling conglomerate down to a relatable size and persuade investors he was the right man for an increasingly complicated job.
While his predecessor was seen as not having acted quickly enough to revitalise the company, the former Walmart Japan executive is moving fast as he tries to raise Seven & i’s valuation while keeping the door open to what would be the biggest foreign takeover of a Japanese company.
Yet investors are growing nervous as the company’s share price refuses to budge despite a rush of restructuring measures announced by Dacus this month — including plans to list and sell a minority stake in the key North American business and buy back more than $13bn in stock.
In addition, they have questions about whether the new CEO will or can represent their interests, given his prominent role in the special committee that the company established to adjudicate on the Couche-Tard bid.
There “are serious questions” around Dacus’s role as special committee chair, and “minimum corporate governance standards would have demanded” he resign while a bid was active or he was being considered for the top position, said David Samra and Benjamin Herrick of Artisan Partners in a letter to the board of Seven & i on Monday.
Others question whether someone who has been part of the company’s slow-moving establishment, including holding a prominent role on the strategy committee, can now engineer a general revaluation and turnaround of the US convenience store business.
“The opinion about Seven has been that they have been moving in the right direction but too slowly. Dacus has been part of that problem,” said one large investor in Seven & i. “They keep asking for more time, they’ve had more time. I think time is up.”
While urging the company to engage with Couche-Tard, Artisan said unless something changed, it would vote against Dacus — and a host of other directors — at the shareholders’ meeting in May, when his appointment is scheduled to be confirmed. Other investors have privately said they are considering similar moves.
Dacus is chair of the board but has now stepped down from the special committee, and Seven & i on Monday defended keeping him on it after he became a CEO candidate in December. It cited his experience, the role of outside advisers and the increasing belief that neither the Couche-Tard bid nor a now-failed $58bn management buyout were viable.
Another long-term investor in Seven said appointing Dacus as chief executive was a viable way “to generate leverage” and “price tension” in negotiations with the Canadian group.
Jefferies analyst Shunsuke Kuriyama said there was “some conflict of interest” with Dacus’s new role, but given special committees only make recommendations, the bigger issue was the company’s plan to create shareholder value as it tries to fend off Couche-Tard and remain a standalone group.
“The standalone path was the least preferred by the market. What we have seen from Dacus so far appears to solidify Seven & i going down that path, and the bottom line is the market is not fully convinced that they can take corporate value above ¥2,100,” he said.
So far the biggest problem for Dacus is that Seven & i’s current share price of about ¥2,150 ($14.50) remains significantly below Couche-Tard’s bid of ¥2,700 a share, or roughly $47.5bn, made last year.
The rival management buyout attempt’s failure last month because of a lack of financing has not helped. Couche-Tard’s disclosure on Tuesday that it had submitted a new yen-denominated, nonbinding bid in January, without providing the price, has added to the pressure.
Conversations between the two sides about a deal are continuing, with Seven’s main argument against a takeover revolving around the probability of antitrust issues in the US, where the 7-Eleven chain is widely considered the main prize for Couche-Tard.
Dacus has said he rejects the idea of keeping the company “in limbo” for years as US authorities decide whether the merged group would damage competition.
His plans instead for an initial public offering of the US chain are seen by some investors and analysts as a warning to Couche-Tard that things might soon become more complicated and move out of its control.
On Tuesday, Couche-Tard said it would continue to try for a friendly deal but that Seven had been slow to give a green light for its search, now under way, for potential buyers of the thousands of US stores that might need to be sold to overcome antitrust issues.
The struggle will become even more public as Couche-Tard and its billionaire founder, Alain Bouchard, along with its CEO and finance chief, hold their first press conference in Tokyo on Thursday.
So far, they have refused to countenance going hostile, but with investors intensifying their criticism of Dacus and Seven’s governance ahead of the annual meeting in May, there is speculation that any number of tactics could now be deployed.
“Honestly, at this point, I have no way of knowing where this is going to go . . . and I’m not sure they do either,” said Dacus last week.
