7&i Holdings Updates Shareholders on ACT Engagement and Leadership

Engagement with Alimentation Couche-Tard

7&i Holdings Co., Ltd. has actively reached out to its shareholders concerning its negotiations with Alimentation Couche-Tard (ACT) related to antitrust challenges and its commitment to succession planning.

In recent communications, the company outlined strategic initiatives designed to bolster its focus on the convenience retail sector, aiming to enhance shareholder value significantly.

Investors have contributed valuable insights, particularly following the response from Artisan Partners Asset Management, expressing concerns about the company’s direction. 7&i believes that all paths to maximizing shareholder value should be considered transparently.

In this letter, 7&i aims to clarify its constructive discussions with ACT regarding their merger proposal and share details about the diligent process of selecting a new CEO.

Active Discussion with ACT on Antitrust Matters

The Board of Directors has formed a Special Committee of independent directors to evaluate the ACT proposal following initial contact. This committee is dedicated to ensuring unbiased oversight and swift action throughout the negotiation process.

Maintaining a strong commitment to shareholder interests, the Special Committee has convened multiple meetings over recent months to assess ACT’s proposals and alternative strategies for creating value. They are focused on not just the potential financial benefits, but also the reliability of these opportunities.

While the discussions have been productive, challenges persist due to significant antitrust concerns. A merger involving 7&i and ACT presents complications, particularly regarding the management of overlapping locations. Coordinating a divestiture process, which could involve relocating thousands of stores, poses considerable risk to the integrity of the merger.

7&i has emphasized that ACT's initial approach—requiring the company to finalize an acquisition deal before negotiating divestitures—would shift excessive risk onto 7&i itself without certainty of a beneficial outcome.

The uncertainty surrounding potential divestiture routes raises red flags for regulatory bodies. Past endeavors, such as the Albertsons-Kroger merger, have illustrated the complexities involved when integrating consumer-centric retailers with overlapping interests.

Therefore, the Special Committee has advocated for a collaborative approach with ACT to clarify paths to divestiture before solidifying any merger agreements.

Proposed Actions for Joint Collaboration

7&i proposed several constructive strategies for ACT to alleviate the inherent risks in their merger discussions:

• ACT could consider an extensive divestment plan encompassing all overlapping establishments, including Circle K locations, to ensure alignment with U.S. antitrust frameworks.
• Alternatively, ACT could finalize agreements with potential buyers for the stores earmarked for divestiture prior to solidifying a merger contract.
• Both parties could advance their discussions immediately, mapping out operational logistics and identifying suitable buyers for the divestiture process to ensure compliance with regulatory expectations.

Encouragingly, ACT has recently shown willingness to explore further the last option. Joint discussions between financial advisors from both companies to engage prospective acquirers have commenced, signaling a potential pathway toward constructive resolutions.

CEO Succession Planning Strategy

Parallel to these discussions, 7&i announced the forthcoming appointment of Stephen Hayes Dacus as the new President and CEO, following careful deliberation from the Nomination Committee.

A comprehensive evaluation highlighted Mr. Dacus’s extensive experience and deep understanding of 7&i’s operational landscape, making him an ideal candidate for leading the company forward.

The Nomination Committee, which includes several independent directors, undertook a rigorous selection process beginning last year with an executive search firm to identify potential candidates for CEO succession.

Details of the Selection Process

Through careful assessment of both internal and external candidates, Mr. Dacus emerged as the preferred choice due to his substantial background in retail leadership and unique insights into the company's strategic vision.

Notably, Mr. Dacus, while initially participating in the Special Committee discussions concerning ACT's bid, recused himself once he was considered for the CEO role. This decision highlights the importance of transparency and integrity throughout the evaluation process.

The committee maintained that Mr. Dacus’s contributions were vital and opted for periodic meetings without him to ensure unbiased evaluations concerning his potential appointment.

Throughout this transition, 7&i remains dedicated to executing its transformation strategy while exploring all opportunities to maximize shareholder value. We will keep our shareholders updated on further developments as they arise.

Sincerely,

Paul Yonamine, Chair of the Special Committee of the 7&i Board of Directors
Meyumi Yamada, Chair of the Nomination Committee of the 7&i Board of Directors

Frequently Asked Questions

What is the purpose of this letter to shareholders?

The letter aims to provide shareholders with updates on the engagement with ACT regarding antitrust issues and the ongoing CEO succession process.

Who are the members of the Special Committee?

The Special Committee comprises independent directors including Stephen Hayes Dacus, Paul Yonamine, Yoshiyuki Izawa, Meyumi Yamada, and Fuminao Hachiuma.

What are the primary concerns regarding the ACT merger?

Significant antitrust issues arise from overlapping stores and the potential challenges in divesting those establishments effectively.

Who is the newly appointed CEO of 7&i Holdings?

Stephen Hayes Dacus has been appointed as the new President and CEO, recognized for his expertise and understanding of the company’s strategies.

How does 7&i plan to ensure shareholder value during this transition?

7&i is committed to executing a strategic transformation plan while evaluating all avenues for enhancing shareholder value as the negotiations with ACT continue.

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