TOKYO (Reuters) - Japan's Seven & i 3382.T named an executive backed by U.S. activist investor Daniel Loeb as its new leader, ending two weeks of management turmoil at the $90 billion retail group in a case seen as a test of corporate governance in the country.
Seven & i, Japan’s biggest retail group, said its board on Tuesday nominated Ryuichi Isaka, currently head of its profitable convenience store unit Seven-Eleven Japan, to be the president of the parent.
Isaka, 58, a career insider at Seven-Eleven Japan, has been credited with driving the growth of the convenience store chain. In an open letter addressed to Seven & i’s board in March, Loeb had called Isaka the leading candidate to helm the group.
But earlier this month, Isaka was targeted by Seven & i’s charismatic CEO Toshifumi Suzuki for an ouster, which failed after a close board vote, leading to the 83-year-old Suzuki resigning his post.
The leadership fight at the 7-Eleven parent is a sign of improving corporate governance in Japan as the board refused to rubber-stamp the powerful CEO, analysts have said.
Seven & i on Tuesday also nominated Katsuhiro Goto, currently its Chief Administrative Officer, to its No. 2 post, and Kazuki Furuya to succeed Isaka as president of Seven-Eleven Japan. The appointments are subject to approval by shareholders.
“We apologize to all stakeholders for creating disturbance over our personnel matters,” Isaka said in a statement announcing the new management.
TOUGH TASK AHEAD
The new management, though, faces a tough task to steer the company that had been built up over decades by Suzuki, a legendary figure in Japan’s retail industry, and to carry out a drastic restructuring of its loss-making supermarket chain Ito-Yokado demanded by Loeb’s company Third Point and some other shareholders. Third Point owns an undisclosed stake in Seven & i.
“They should work on improving profit, including giving consideration to Third Point’s demand to offload it,” said Takayuki Suzuki, an independent retail analyst, referring to Ito-Yokado.
Recent acquisitions of companies such as luxury clothing store Barneys Japan and mail-order business Nissen should also be reconsidered, he said.
“The M&A deals under Suzuki were mistakes. There were no synergies from Nissen and Barneys, and they needed to be cut off. So it will involve rejecting a lot of what was done under the Suzuki leadership,” he said.
Seven & i shares, which have risen 5.5 percent since the management tussle took a dramatic turn two weeks ago, ended 1.2 percent higher on Tuesday, ahead of the announcement of the appointments.
Additional reporting by Ritsuko Ando; Editing by Edwina Gibbs and Muralikumar Anantharaman
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