Junro Ito flew to California this year on a mission: The billionaire executive at Seven & i Holdings, the Japanese parent company of 7-Eleven, felt the company had lost its way. He wanted to revive the culture fostered by his father, the company’s founder.
Mr. Ito wanted to establish training workshops for Seven & i employees and was seeking advice from experts at Claremont Graduate University, where the management guru Peter Drucker, a close friend and adviser to his father, had taught for decades.
The workshops would instill in executives and others at Seven & i the philosophy espoused by Mr. Drucker — that the purpose of a company is to serve its customers, not to maximize profits for shareholders.
Back in Tokyo, the company started hosting the monthly management workshops just as Mr. Ito, a vice president at Seven & i, began plotting a multibillion-dollar takeover. His family owns a minority stake in Seven & i, and he wanted to keep it from being acquired by a foreign rival.
Seven & i has more than 85,000 stores, and 7-Eleven is a cornerstone of Japanese society. People who know Mr. Ito, speaking on the condition of anonymity, said his fixation on Mr. Drucker offered a window into his plan for the company.
The battle for control of 7-Eleven is emblematic of sweeping changes underway in corporate Japan. For more than a decade, officials have pushed Japanese companies to take steps — like giving proper consideration to takeover offers — to show they are open to actions that would create more value for shareholders.
In essence, Japan’s policymakers are pushing for companies to focus less on Mr. Drucker and more on Milton Friedman, the influential economist who said the purpose of business was to generate profits for shareholders.
Companies have started to respond: buying their own shares to boost stock prices, engaging with activist investors and bringing independent shareholder advocates onto boards. Warren E. Buffett and other foreign investors have piled into Japanese stocks, helping to lift them to their highest values ever.
Seven & i’s shares are among those near record highs, especially since August, when it received an unsolicited bid worth $38 billion from the Canadian retail group Alimentation Couche-Tard, owner of the Circle K convenience store chain. After Seven & i rejected the takeover proposal in September, Couche-Tard returned the next month with a $47 billion offer.
As Seven & i considered that offer, Mr. Ito submitted his own bid in November of more than $50 billion to take full control of the company. If successful, Mr. Ito’s deal would be one of the largest leveraged buyouts ever.
Unlike Couche-Tard, which has promoted its offer in many media appearances, Mr. Ito has stayed silent about the details and motivations behind his bid. Seven & i confirmed only that it had received a confidential proposal from Mr. Ito, and declined to make him available for an interview.
Family Fortunes
In Japan, founding family members like Seven & i’s Mr. Ito tend to champion relationships with customers and communities, long-term stability and corporate culture, said Yasuhiro Ochiai, a University of Shizuoka professor who is a leading researcher of family businesses and management in Japan.
These founding family members hold significant sway — either through direct ownership or as managers — in about half of all public companies in Japan, according to Mr. Ochiai’s research. They often embody “an older, unique style of Japanese capitalism that does not always prioritize shareholder returns and profit generation,” Mr. Ochiai said.
Japan has long been regarded as impenetrable for foreign companies seeking mergers and acquisitions.
Couche-Tard is aware of this, because it tried to acquire 7-Eleven before. It approached Masatoshi Ito, Junro Ito’s father and the founder of the company that eventually became Seven & i, about a potential deal in 2005. It was swiftly dismissed.
Masatoshi Ito’s thinking was that the company’s culture could be diluted if a foreign company took control.
Mr. Ito built his company into an empire of thousands of grocery and convenience stores across Japan, based on what he said was a singular focus on serving customers and their evolving tastes. A typical 7-Eleven today sells around 3,000 or more products, 70 percent of which are switched out or upgraded each year, be it a new recipe for an egg sandwich or a different flavor of seaweed on a rice ball.
The 7-Eleven stores eventually became so integral to daily life in Japan that the government declared them part of the national infrastructure.
Customers Come First
Masatoshi Ito often credited his success to the teachings of Mr. Drucker.
Mr. Drucker has long had a cult following in Japan, where his beliefs align with those of lauded figures like Eiichi Shibusawa, known as the father of Japanese capitalism, who argued that business should benefit buyers, sellers and society at large.
At first, Mr. Ito went to Mr. Drucker for consulting advice, but people who knew them said they had eventually formed a close friendship over long evenings and conversations by the pool of Mr. Drucker’s bungalow in Claremont, a city east of Los Angeles.
At a Seven & i training center south of Tokyo, all new employees watch an 18-minute video in which Masatoshi Ito, who died last year at 98, walks through the history of the company’s founding and his belief that customers always come first.
One clip shows a hierarchy of Seven & i’s constituents, with customers at the top followed by suppliers, local communities and executives. More than 10 tiers down, at the very bottom, are “general shareholders.” People at the training center joke that this disheartens investor firms when they visit.
The Canadians Return
This year, when Alain Bouchard, Couche-Tard’s founder, again approached 7-Eleven’s owner about a deal, he encountered a vastly changed Seven & i — and Japan.
Seven & i had pushed beyond convenience and supermarket stores, with retail outlets that sold everything from stationery to baby goods. But many of these peripheral businesses were struggling.
For much of the past decade, Seven & i has been at war with activist investors from the United States who argued that the company would be worth more if it focused solely on its core convenience stores.
In 2023, Japanese regulators updated government guidelines to encourage companies to give serious consideration to legitimate takeover offers. The aim was to push beyond the age of fortresslike companies that could rebuff foreign takeover offers without deliberation.
After Couche-Tard made its $38 billion offer to Seven & i this year, the Japanese company set up a committee of independent directors to consider the bid. A few weeks later, Seven & i’s committee rejected Couche-Tard’s offer as “grossly undervaluing” the company. Couche-Tard then returned with a bigger, $47 billion bid.
For now, Seven & i said, the committee is considering the competing offers made by Couche-Tard and Junro Ito. Mr. Ito is in discussions with a number of institutions, including big Japanese banks, to secure the money he will need to fund the takeover.
A ‘Hybrid’ Model
While the bids are being considered, Seven & i’s leaders are trying to convince investors that the company can thrive without a change in ownership.
Seven & i’s president, Ryuichi Isaka, has been trying to boost the company’s value by shedding underperforming businesses and focusing on 7-Eleven stores, as activist shareholders have demanded. In October, the company said it planned to split off its supermarket operations and some other peripheral units into a separate holding company.
Mr. Ito has not made clear his strategy for Seven & i, but people with knowledge of his thinking said he envisioned the company’s continuing to double down on its convenience stores in Japan and overseas. Those efforts could be carried out by current management.
Couche-Tard declined to comment on its bid. But a spokesman said the company “values the deep industry knowledge and expertise of Seven & i,” and would aim to spread its offerings across Couche-Tard’s global operations.
In Japan, some prominent business scholars argue that the clash of Western-style capitalism and traditional Japanese business models will ultimately produce a new type of corporate leader.
Jusuke Ikegami, the dean of the Waseda Business School in Tokyo, said that a decade ago he asked a classroom of top Japanese executives to tell him the market value of their own companies — and only a fraction got it right. But today, he said, some leaders are paying closer attention.
“It’s a hybrid — they don’t go all the way to a U.S.-style total focus on investor returns, but balance the traditional multistakeholder model with more care about the long-ignored shareholder,” Mr. Ikegami said. It remains unclear, he said, where Mr. Ito stands on this spectrum.
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