(Bloomberg) -- Seven & i Holdings Co. is considering a listing of Ito-Yokado, the historic supermarket retail core of the company, and eventually split it off from the more profitable and faster-growing 7-Eleven franchise to focus its efforts on making convenience stores a global business.

The retailer’s board and strategic committee will develop a plan for the split and list the legacy operation “as soon as reasonably practicable,” the Tokyo-based retailer said in a statement Wednesday. The stock fell 1.4% before the announcement, as news trickled out that it was planning to revamp Ito-Yokado. 

Seven & i, which has a market value of ¥5.65 trillion ($37.2 billion), came under pressure from ValueAct Capital Management last year when the activist investor called on it to improve its valuation and embrace “bold, structural reform and pursue it with urgency.” The Tokyo-based retailer has taken some steps, including considering closing stores, and said it will step up investments to grow the convenience-store business, particularly through mergers and acquisitions.

The committee concluded that separating the two “businesses is in the best long-term interests of both businesses, their employees and our shareholders,” it said in a statement. “Although there was and is a broad range of views amongst our investors, one common theme is the need to accelerate our growth and realize our global potential. We agree wholeheartedly with this.”

 

Speculation has been swirling for months over the fate of Ito-Yokado, which was the company’s original retail franchise before it bought 7-Eleven and turned it into a large, successful business. The retailer traces its origins back to the Yokado Clothing Store, founded in Tokyo in 1920. Seven & i also operates Denny’s Japan restaurants and a banking network. Last year, Seven & i finalized the sale of its Sogo & Seibu Co. department store chain to Fortress Investment Group at an enterprise value of about ¥220 billion.

“This is a good direction for the company, and establishes a structure for them to focus on convenience stores in Japan and overseas,” said Taku Sugawara, an analyst at Iwai Cosmo Securities Co.

The new structure will “provide employees with autonomy to pursue re-growth, and to have independence financially in strategic decision making.” Seven & i has previously announced a partnership with the supermarket unit to add more diverse products to its bigger convenience stores. 

Read More: 7-Eleven Tests a New Store Aimed at Delivering More Convenience

Seven & i shares were up almost 17% this year before the reports. The company announced share buybacks late last year as well as a 3-for-1 stock split. Seven & i said it will “proactively implement strategic investments” in the convenience-store business.

The company also announced results for the latest fiscal year, showing a 5.5% gain in operating profit to ¥534 billion, exceeding analysts’ average projection for ¥525 billion. Net sales fell 1% to ¥11.47 trillion for the period that ended in February, compared with the ¥11.44 trillion predicted by analysts. 

For the current year, Seven & i issued an outlook for ¥545 billion in profit on ¥11.25 trillion in revenue, behind analysts’ projections for ¥551 billion and ¥11.4 trillion.

After Seven & i had pushed back on ValueAct’s recommendations, the investor sought to replace Isaka and other board members with its own candidates, but failed. When asked about the assertions an interview earlier this year, President and Chief Executive Officer Ryuichi Isaka said they’re not limited to ValueAct, because he’s heard similar comments from other shareholders. 

Read More: Japan’s Convenience Stores Can Span the Globe, 7-Eleven CEO Says

It’s not clear whether ValueAct remains a major shareholder. The investor is no longer on a list of stakeholders with a significant holding, although it is possible that ValueAct has loaned out its stake or is otherwise holding it indirectly.

Seven & i also said in the statement that it’s promoting Junro Ito, son of Ito-Yokado’s late founder Masatoshi Ito, to vice president. The role will become effective May 28 if approved at the annual shareholders’ meeting.

--With assistance from Gareth Allan, Natsuko Katsuki and Mia Glass.

(Updates with detail from statement.)

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