7-Eleven Owner Drops Go-It-Alone Strategy for SoftBank Embrace

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(Bloomberg) — Seven & i Holdings Co.’s move toward selling a stake to SoftBank Corp. and PayPay Corp. signals a willingness to surrender some control over its future in return for the benefits of being allied with key strategic partners.

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The Tokyo-based retailer is mulling a new share issuance totaling several hundred billion yen to SoftBank and PayPay, which is Japan’s dominant payments operator, Bloomberg reported last week, citing people familiar with the matter. The move would allow all three companies to capture more of consumers’ wallets, and help Seven & i to spur faster profit growth at its convenience stores. 

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But it would mark an end to Seven & i’s long-held policy of staying fiercely independent by eschewing capital tie-ups and maximizing tactical flexibility. While the company has entered into several business partnerships, it’s avoided selling equity stakes in itself to retain a free hand in a fast-evolving business. That go-it-alone approach has prevented it from enjoying greater economies of scale in areas like payment infrastructure and artificial intelligence.

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It also runs counter to industry trends. Chief rival FamilyMart became a wholly owned unit of major trading house Itochu Corp. in 2020 and four years later another blue chip trading house, Mitsubishi Corp., joined forces with telecom giant KDDI Corp. to buy out Lawson Inc. Seven & i has had an extended business relationship with Mitsui & Co., but the top trading house owns less than 2% of its shares.

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Those ties may grow closer if the credit card arm of Sumitomo Mitsui Financial Group Inc., a historically Mitsui-affiliated bank, follows through on a possible plan to take an equity stake in Seven & i in conjunction with SoftBank and PayPay, said the people familiar with the planned transaction, who asked not to be identified because the negotiations aren’t public.

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SoftBank, PayPay and Sumitomo Mitsui are in negotiations and aim to sign a deal this summer, the people said. The discussions are in flux, and there is a chance that a final agreement won’t be reached. 

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Representatives for SoftBank, which owns a majority stake in PayPay, and Sumitomo Mitsui’s card unit declined to comment. Seven & i didn’t immediately comment. 

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Shares of PayPay, which trade on the Nasdaq Global Select Market, fell 0.8% to $15.50 in New York on Friday. American depositary receipts of Seven & i rose 2.3% to $13.50.  

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Deep-Pocketed Protection

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PayPay rewards and SoftBank’s mobile-customer base could help drive traffic to Seven & i’s stores, Lea El-Hage, a Bloomberg Intelligence industry analyst, wrote in a July 10 research note. And the retailer could leverage its new equity partners’ technology to implement greater automation, AI-driven logistics and efficiency initiatives. However, the expected new offering would dilute core performance metrics like earnings per share and return on equity. 

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“Issuing stock would put the burden of proof on management to show that traffic, monetization and productivity gains outweigh EPS and ROE dilution,” she wrote.