7/19/2025

North American Investors Quadruple Japan Stock Purchases in 1st Half

Nikkei Asia (07/19/25) Inujima, Akira

Value-hunting North American investors sharply raised their bets on the Japanese stock market in the first half of the year as they sought to diversify their portfolios away from the U.S. North American investors bought 835.4 billion yen ($5.62 billion) worth of Japanese equities on a net basis from January to June, four times the year-earlier level, according to data released by the Tokyo Stock Exchange on Friday. The amount exceeded the 827.7 billion yen in net buying during the first half of 2023, when Warren Buffett-led Berkshire Hathaway's investment in Japanese trading houses sparked an inflow of money into the market. The first-half performance this year marked a high not seen since 2013, when Japanese stocks drew attention amid the Abenomics fervor. The surge came as the Trump administration's policies raised uncertainty over U.S. markets, prompting investors to spread their bets. "U.S. stocks are expensive on an absolute and relative basis, offering investors little margin of safety for these risks," said Drew Edwards, head of Japan value equities at the U.S. asset management firm GMO. GMO has lifted the weight of Japanese stocks in its investment strategy to roughly 30%, according to Edwards. GMO was drawn by the improved capital efficiency at Japanese corporations and their low valuations, he added. European investors were more active in the Japanese stock market during the first half. For Europeans, the total transaction volume came to 592 trillion yen for the first half, compared to 55 trillion yen for North American investors. "European investors' trading volume is driven up by high-speed trading to a large extent," said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Intelligence Laboratory. But U.S. investors held 136 trillion yen worth of Japanese equities at the end of 2024, according to data from the Ministry of Finance, accounting for roughly 70% of the amount held by overseas investors. Despite their high trading volume, Europeans only held 15% of the total. Active trading by European investors affects short-term stock prices, but long-term price trends can change significantly depending on the actions of North American investors. Whether Japanese stocks continue to see big inflows in the second half will depend on U.S. conditions. Investor interest has swung back to U.S. stocks and their strong growth potential. AI chip designer Nvidia (NVDA) became the first listed company in history to have a market capitalization of over $4 trillion. The tech-heavy Nasdaq index is frequently hitting new highs.

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7/18/2025

UK to Set Out Water Reforms as Thames Water Faces Crisis

Reuters (07/18/25) Young, Sarah; Sandle, Paul

Britain is expected to set out measures to fix its broken water sector on Monday as Thames Water (WATH) teeters on the brink of failure, saying it needs a "reset" of regulation to have any chance of avoiding nationalization. The country's biggest water company has been fighting for its survival for the last 18 months. If it fails the government would have to step in, adding billions of pounds to already stretched public finances. Britain commissioned a review last year into the privatized water industry in England and Wales, which needs huge investments to fix aging infrastructure and stem sewage spills into rivers and lakes that have angered the public. Former Bank of England deputy governor Jon Cunliffe, who is leading the review, has recommended overhauling regulation to lower investment risk, merging regulators to give companies clearer direction and new rules on river bathing standards. "Water companies must be made more attractive to stable, long-term investors," Cunliffe said in his interim report in June, adding that the sector required more predictable regulation. Launching the review last October, environment minister Steve Reed said there had been "very severe failures of regulation," raising the prospect that Ofwat, the water industry's financial regulator, could be scrapped. Thames Water's creditors have offered it a rescue deal worth about 5 billion pounds ($6.7 billion), and they, along with Thames Water, are in talks with Ofwat. But in return they want a regulatory reset, which could mean flexibility on pollution targets, clemency on penalties, and more time to deliver improvements. Data released on Friday showed the scale of the sewage problem in England, with serious pollution incidents up 60% in 2024 compared to the previous year. Thames Water was responsible for 44% of the most serious incidents, the Environment Agency said, but all nine companies showed "consistently poor performance." Thames Water, which has 16 million customers in southern England, forecasts it will face 1.4 billion pounds in pollution fines and penalties over the next five years. While the government wants to cut water pollution, it can ill afford a Thames Water bankruptcy that would add the company's 17 billion pound debt onto government books, at a time when finance minister Rachel Reeves is already close to breaking her fiscal rules. The government has repeatedly said it is keeping a close eye on Thames Water. Environment minister Steve Reed said in June that his department had "stepped up" preparations for its special administration regime, a form of temporary nationalization.

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7/18/2025

Railroad Operator Union Pacific Exploring Deal for Norfolk Southern

Wall Street Journal (07/18/25) Thomas, Lauren; Glickman, Ben

Railroad operator Union Pacific (UNP) is holding talks to acquire its smaller rival Norfolk Southern (NSC) in a deal that could create the largest rail operator in the country, according to people familiar with the matter. The talks are early stage and there are no guarantees they will result in any deal or receive regulatory signoff, the people said. It is also possible another suitor could emerge. Union Pacific has a market value of around $140 billion, while Norfolk is valued at about $60 billion. The deal would create a sprawling rail network that spans the continent and handles a sizable share of freight across the United States. Currently, no railroad operator has a network that runs coast to coast in the U.S. Union Pacific Chief Executive Officer Jim Vena has spoken publicly in recent months about the benefits of a transcontinental railroad. Vena has said that a transcontinental railroad would improve service as it would smooth out current delays at interchanges, when a railroad operator transfers railcars to another operator. Still, any deal would face serious scrutiny from a series of regulators including the Surface Transportation Board, the economic regulator primarily overseeing freight railroads, as well as the Justice Department, investors, Amtrak, and labor unions. Analysts have speculated that Union Pacific is likely entertaining a merger proposal in part because of a more favorable regulatory environment under President Trump. The current chairman of the STB, Patrick Fuchs, who took over the chairmanship in January, has said that he plans to speed up the rulings on disputes and other legal decisions. Fuchs said earlier this year that several long-running proceedings have already been expedited. Norfolk is seen as a vulnerable target today. Late last year, Norfolk's Chief Executive Alan Shaw departed the company after a board investigation into an alleged relationship he had with an employee. That came after the company fended off activist investor Ancora Holdings, which had criticized the railroad's response to its 2023 Ohio derailment and its sluggish financial performance. Union Pacific, based in Omaha, Neb., is one of the two major railroads operating west of the Mississippi. The freight railroad had been in the crosshairs of the STB for service and labor issues. Under former chairman Martin Oberman, the regulator has held public hearings and criticized Union Pacific over embargoes. The last time federal regulators approved a major railroad merger was in 2023. Canadian Pacific Railway (CP) and Kansas City Southern (KSU) sought to merge in a deal to create the first freight rail network linking Canada, the U.S., and Mexico. Some federal agencies, communities, rail customers and other railroads, including Union Pacific, had pushed back against the merger since it was announced in 2021. They had concerns about reduced competition, higher shipping rates, and the possibility of worse rail service. A deal between Union Pacific and Norfolk, if completed, could also mark the largest corporate transaction this year, in what has been an underwhelming dealmaking environment through the first half of the year.

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7/18/2025

Seven & i Deal Collapse Seen Sending Signals to Activist Investors

Nikkei Asia (07/18/25) Kim, Lisa; Nagumo, Jada; Tani, Shotaro

Canadian retailer Alimentation Couche-Tard (ANCTF) has called it quits after a yearlong siege to take over Japan's iconic Seven & i Holdings (SVNDY). Market experts see the withdrawal as an invitation for activist investors to step up their campaigns to push for more change in corporate Japan. Recent corporate governance reforms, increased investor activism and government guidelines on fairness and transparency when receiving takeover bids have powered dealmaking to record highs in Japan. The attempt to buy the operator of the 7-Eleven convenience store chain was widely seen as a litmus test for Japanese conglomerates' openness to M&A offers by foreign parties. The Canadian multinational operates Circle K convenience stores, a brand that last appeared in Japan in 2018. Couche-Tard's letter notifying Seven & i's board of directors of its decision to scrap the proposal "is as aggressive a calling out of a target management team as I've seen in decades," said Mark Kelly, chief executive of MKP Advisors, a boutique advisory firm in the U.K. "They are clearly trying to appeal to activist investors" to take sizable positions in the Japanese company and force it to change its behavior, Kelly said. "The level of detail [Alimentation Couche-Tard] gives the market about the way in which 7&i has behaved is really quite amazing." The Canadian retailer's move is not an uncommon tactic used by potential acquirers. "In general, if the buyer wants to think about the tactics for the deal to be successful, I think they would want to craft a storyline to appeal to institutional investors and send a message to regulators, too," said Yoshinobu Agu, head of mergers and acquisitions at Citi in Tokyo. He added that he does not see signs that corporate Japan is defensive to foreign buyers just because of their origin. On Thursday, Couche-Tard abandoned its $47 billion proposal, citing a "lack of constructive engagement." If the deal had gone through, it would have been the biggest foreign acquisition of a Japanese company. The Canadian retailer sought to buy 100% of Seven & i's business outside Japan and 40% of the local business, according to a statement by the retailer. Since both sides entered into a nondisclosure agreement in May for the Canadian firm to conduct due diligence, "there has been no sincere or constructive engagement from 7&i that would facilitate the advancement of any proposal," the letter said. "We believe this approach reinforces our concerns about your approach to governance," it added. The Japanese company refuted such a characterization, saying in a statement on the same day that the Canadian retailer "unilaterally decided to end discussions and withdraw its proposal." Seven & i argued that it "consistently engaged in good faith" to explore whether the two sides could reach a deal that "would benefit our shareholders." Shareholder activism has boomed in Japan thanks to corporate governance transformations and low valuations. Nearly 110 campaigns were launched last year, up around 75% compared to 2018, according to Diligent Market Intelligence. In 2023, the Ministry of Economy, Trade, and Industry released guidelines on corporate takeovers, encouraging foreign strategic players to come to Japan to spur activity while emphasizing to corporate Japan that they needed to take M&A bids seriously. This, coupled with the weak yen and low interest rates, has powered a surge in Japanese M&A transactions, which jumped 6% in 2024 from a year earlier, according to data provider Mergermarket. About 1 in 10 deals made worldwide involved Japanese companies. "Japan has become the single largest activist market outside of the U.S., so the activists are here to stay," said Yasu Hatakeyama, a former investment banker who is a visiting professor for M&A at Hitotsubashi ICS in Tokyo. "If the management is not doing a good job, not delivering what it promised, then they're going to get into trouble." Couche-Tard's takeover attempt shows that Japanese companies have to focus on their core businesses and raise their stock prices to avoid becoming buyout candidates, said Zuhair Khan, senior fund manager at UBP Investments in Tokyo. "Activists have been telling them [Seven & i] for years to focus on the convenience store business and get out of noncore businesses, but it was only after the Couche-Tard bid that they started acting," Khan said. Khan said investors want to see Seven & i execute its plans for restructuring and massive share buybacks promised in March as part of an effort to remain a stand-alone entity. Given that the Japanese company's annual general meeting took place in May, some analysts say shareholders may have limited options to advocate change for now. "We are on the wrong side of the annual general meeting season," Kelly of MKP Advisors said. To make any meaningful progress, "we will need to wait for the second quarter of 2026." Foreign entities eyeing large Japanese companies will likely take cues from Couche-Tard's failed bid. "In Japan, a founding family still has a say in the future of the company," said Naoya Shiota, a partner at the international law firm Morrison Foerster in Tokyo. "In general, to unlock a company, it is important to convince the founding family, along with other major shareholders." Citi's Agu said many foreign buyers do not want to make a hostile approach in Japan because it is a difficult market to evaluate without accurate understanding of the business culture and market practice, as well as proper assessment of any negative impact. "It is difficult for most of the foreign strategics to take not even hostile but any sort of aggressive or proactive approaches beyond the preliminary stage if there is any negative response," he said. While the fact that a foreign entity sought to take over an iconic Japanese company shows corporate Japan might have changed, the fallout has laid bare a more serious side, said Jamie Halse, CEO of Senjin Capital in Australia. "Directors in Japan do not have a legal duty to the shareholders, only a duty to the company," said Halse, who runs a Japan-focused asset management firm. But "at the next annual general meeting, shareholder voting may be influenced by views as to whether the directors acted with shareholder interests front of mind."

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7/18/2025

Vivendi Jumps After Regulator Orders Bolloré to Make Offer

Bloomberg (07/18/25) Berthelot, Benoit; Patel, Tara

Vivendi SE (VIVHY) surged after France's market regulator ruled billionaire Vincent Bolloré and the eponymous company he controls must make a public offer for shares within six months. The Autorité des Marchés Financiers on Friday issued a ruling that Bolloré SE should have offered to buy out the other shareholders in last year's breakup of Vivendi SE. The AMF said Bolloré should make a bid for shares of what remains of the original Vivendi, which is still listed in Paris and has a market value of about €3.3 billion ($3.8 billion). Shares in Vivendi, which is nearly 30% owned by Bollore SE, jumped as much as 13% on the decision, the biggest intraday increase since December. The ruling is a blow to Bolloré and goes in favor of CIAM, an activist investor group that has argued to the regulator and in French courts that the splintering of Vivendi gave preferential treatment to top shareholder Bolloré SE over the interests of minority shareholders. If enough shareholders accept the offer, Vivendi may delist. “It's a good start, we consider this a first victory,” Catherine Berjal, head of CIAM, said by telephone. “We will be extremely vigilant on the price of the offer.” It's not clear how much Bolloré will have to offer shareholders and the ruling could still be overturned by an appeal. A Paris court in April found that the French businessman effectively controls Vivendi through his Bolloré SE holding company and controls the decisions made at its shareholders' meetings. The finding overturned a decision last November by the markets regulator that had allowed the breakup. The media tycoon has appealed the April decision and the AMF specified in its Friday ruling that any public withdrawal offer can't be completed until a decision by France's top court is handed down. This could overturn both the April court decision and the AMF's latest ruling. “This is Vivendi's last resort,” analysts at Oddo said in a note. Once the top court has issued its opinion, a “plausible time frame” for the public offer could be January or February, they added. Oddo estimated the fair value for Vivendi at about €5 billion, and said that Bolloré SE has the means to acquire the 70% of the company it doesn't already own for about €3.5 billion. CIAM puts the value at €5.4 billion, noting Vivendi's stake in record label Universal Music Group NV (UNVGY). Vivendi's breakup was one of the biggest and most surprising shake-ups orchestrated by 73-year-old Bolloré over the empire he built up over decades. It was billed as a way to reduce Vivendi's so-called conglomerate discount. Some minority investors have long complained about the overly complicated structure of Bolloré's constellation of companies that makes control hard to discern. The offer would cost Bolloré SE some of its cash pile accumulated through the sale in recent years of its historic transport and logistics businesses. Bolloré SE had argued that it didn't have control over Vivendi SE before the split and shareholders voted overwhelmingly in favor of the operation, according to the Friday ruling. CIAM had argued that shareholders in the three spun-off entities are less protected than they were at the old Vivendi because they are trading on different stock markets that don't have the same rules, and that the new Vivendi isn't the same company they invested in. The AMF's decision on Friday doesn't repair the harm to shareholders in the three other spun-off entities nor those shareholders who didn't retain their Vivendi stock, said CIAM's lawyer Julien Visconti. The AMF should have ordered Bolloré SE to make offers for shares in all of the companies, he said, and CIAM may push for this in a challenge to the decision.

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7/17/2025

Swatch Activist Ups Pressure as Profits Plunge over China Weakness

Financial Times (07/17/25) Ruehl, Mercedes

Swatch Group’s (SWGAY) profits plunged almost 90% in the first half of the year after sales fell steeply in China, strengthening investor pushback against the board of the struggling Swiss watchmaker. The group, whose brands include Omega, Longines, and Breguet, reported net income of SFr17 million ($21 million), down from SFr147 million a year earlier, on Thursday. Swatch attributed a 7.1% decline in revenues over the same period to weak demand in China, where sales fell more than 30% in its wholesale business and by 15% in its retail business. Chief executive Nick Hayek, who has been at the helm of the Swiss group for 22 years, has come under mounting pressure from investors after presiding over a roughly 50% decline in its shares over the past two years. Activist investor GreenWood Investors, which owns 0.5% of Swatch’s shares and has been campaigning for a strategic rethink, confirmed on Thursday that it had initiated legal proceedings against the company. Steven Wood, GreenWood’s founder, failed in his effort to secure a board seat at the company’s annual meeting in May, despite winning the support of more than 60% of Swatch’s so-called bearer shareholders. His campaign was in effect blocked by the Hayek family, who hold registered shares with greater voting rights. Wood was deeply critical of the AGM’s “confusing procedures” and his firm has applied for a so-called conciliation procedure on the basis that the meeting was wrongfully set up. Lawyers on both sides will now try to find a resolution but if they fail to do so, the issue may end up being heard in court. “We are confirming that we have filed for a conciliation procedure concerning the election process of the bearer shareholders’ representative at this year’s Swatch AGM. We will not be providing any further comment at this stage,” GreenWood said in a statement. Swatch said it had not yet “been served with a complaint or received a request for a conciliation hearing” and that it was “not aware of what is to be conciliated.” GreenWood may also still request an extraordinary meeting as the legal process plays out. That would require the backing of 5% of all Swatch shareholders, with Wood then able to ask for a separate vote among the company’s bearer shareholders to be elected as their representative. Swatch is not alone in finding the Chinese market difficult: its rival Richemont this week reported a 7% decline in revenues from China during its most recent quarter. Despite difficult recent trading, Swatch shares were up slightly on Thursday after the group said it expected the Chinese market to improve in the second half. “The company reported observing initial positive signs of improvement in China, particularly in ecommerce and a reduction in retailer inventories,” said analysts at Vontobel.

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7/17/2025

Analysis: Collapse of $46 Billion Buyout Ramps Up Pressure on Seven & i

Bloomberg (07/17/25) Stevenson, Reed

Canada’s Alimentation Couche-Tard Inc. (ANCTF) dropped its ¥6.77 trillion ($45.8 billion) proposal to buy Seven & i Holdings Co. (SVNDY), putting pressure on the operator of 7-Eleven convenience stores to show shareholders it can stage a turnaround on its own. The yearlong pursuit of what would have been the biggest foreign takeover of a Japanese company ended in acrimony, with Couche-Tard saying Seven & i’s founding Ito family had never been open to talks and blaming the board for a “calculated campaign of obfuscation and delay.” In response, Seven & i said it was disappointed by Couche-Tard’s decision to walk away, and disagreed with what it called “numerous mischaracterizations” in the letter. Investors sent Seven & i’s stock down around 9%, reflecting skepticism over the company’s plan to deliver value through changes that include a deal to sell off less-profitable retail operators, a listing of its US business, a ¥2 trillion share buyback and the recent appointment of Stephen Dacus as chief executive officer. Couche-Tard’s withdrawal marks a critical juncture for Seven & i, which has struggled to improve its North American operations despite its dominance in Japan. The collapse of the deal also comes amid an evolving corporate landscape in Japan, where shareholder activism is surging and traditional protections against foreign takeovers are under greater scrutiny. Seven & i’s new leadership, along with other Japanese companies grappling with challenges, face ever more pressure to deliver as foreign investors and private equity firms eye buyout opportunities in Japan. “There is no question that Couche-Tard’s negotiations until now have actually woken up executives,” said Jesper Koll, expert director at Monex Group Inc., adding that management will have to show that they can succeed globally. “They have their work cut out for them.” Couche-Tard also disclosed it had proposed alternate arrangements for a deal, including buying Seven & i’s international unit and taking a minority stake in the Japanese business. Seven & i countered with a proposal for Couche-Tard to acquire just the overseas business in exchange for stock. Neither side budged. The proposed price of ¥2,600 represented a premium of 48% to Seven & i’s shares prior to the approach becoming public in August 2024, and 18% more than Wednesday’s closing price. Inflation and weak demand have weighed on Seven & i’s US business, while conditions have been gradually improving in Japan. Before the proposal became public, an attempt to acquire such a well-known Japanese business at this scale would have been seen as audacious and unlikely, given the historical tendency of the government and corporate boards to prioritize stability over shareholder value. That view may remain in place for a while, despite changes to corporate guidelines aimed at injecting more vigor into corporate Japan through improved governance and protections for investors. “The moat of Japanese protectionism proved too much for Couche-Tard to cross,” Andrew Jackson, head of Japan equity strategy at Ortus Advisors, wrote in a note. “It was always highly unlikely that this was going to be successful given Seven & i’s positioning as one of Japan’s most successful global companies and the fast closing of the ranks.” While the deal has seen its share of dramatic twists and turns — including a ¥9 trillion counter-proposal led by Seven & i’s founding family that collapsed in February for lack of funding — Couche-Tard now considers the prospect truly dead, people familiar with the matter said. Shareholders already frustrated with Seven & i’s slow pace of change and low valuation may use Couche-Tard’s disclosures to push management to do more to deliver value. Some of them, most notably Artisan Partners Asset Management Inc., had pressed the company to engage more deeply with Couche-Tard. In a letter sent to the company’s directors in March, the US investment firm cited concerns around potential conflicts of interest and the board’s “failure to pursue the path that offers the best future for the company and maximizes value.” The conditions are still in place for big deals to happen, even if it wasn’t going to be between Seven & i and Couche-Tard, according to Nicholas Smith, strategist at CLSA Securities Japan Co. “The announcement was a significant disappointment, but absolutely not unexpected; I see it as specific to 7&i, rather than representing the overall trend in Japan,” Smith said. “Activist trades and shareholder proposals are on fire. Private equity sees Japan as one of the most attractive markets in the world and is hiring aggressively. M&A, including hostile M&A, is picking up rapidly. Management can’t afford to relax one bit.” Couche-Tard’s letter draws a line under what had been an unusually public and sustained buyout campaign. Alain Bouchard, Couche-Tard’s co-founder and chairman, and CEO Alex Miller made a direct appeal in Tokyo in March for their proposal, holding a news conference to take questions and explain their rationale. Bouchard said at the time that it might be possible to “enhance” the buyout proposal with better access to financial information. Since then, the two parties signed a non-disclosure agreement to share information, but Couche-Tard said in the letter that the level of engagement wasn’t enough. Most of the financial data shared by Seven & i was minimal or already publicly available, and meetings with management were superficial or tightly scripted, Couche-Tard said. “None of our critical questions were answered,” the company said. In one meeting in Dallas, Couche-Tard said a Seven & i executive who attempted to “thoughtfully address” a question related to international licensees was interrupted and rebuked by Dacus, who pointed to his head as if to remind his colleague to “think.” Seven & i has cited concerns over potential pushback from US antitrust regulators over any deal to combine with Couche-Tard. In order to address this risk, the two sides agreed earlier this year to seek potential buyers for about 2,000 North American convenience stores. Although several parties expressed interest in acquiring the stores, Seven & i didn’t share required information with potential buyers, Couche-Tard said. There was also a $1.2 billion termination fee that Couche-Tard said it was ready to pay if it walked away from a deal, which would increase to $1.4 billion if it weren’t willing to divest more stores mandated by the Federal Trade Commission. For its part, Seven & i said the board’s special committee evaluating the proposal “engaged in good faith and constructively with ACT to explore the possibility of reaching a deal that could be consummated and that would benefit our shareholders.” Seven & i is due to give an update on its turnaround strategy in August. There were already signs that Couche-Tard was willing to walk away, including comments by Miller last month that it would bring clarity on any deal “sooner, rather than later.” In the end, Couche-Tard didn’t have enough access to information to deliver an offer that Seven & i’s board couldn’t refuse. “Seven & i did what any U.S. company would do,” said Jamie Halse, CEO at Senjin Capital. “It was up to Couche-Tard to put in a knockout offer. The issue is likely a catch-22 of needing financing to make the offer, but needing management support to get financing.”

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7/17/2025

Canadian Retailer Abandons Its Quest for 7-Eleven

New York Times (07/17/25) Davis, River Akira

After a year of prolonged negotiations marked by dramatic twists and turns, the Canadian retailer Alimentation Couche-Tard (ANCTF) said it was abandoning its multibillion-dollar bid to acquire the owner of 7-Eleven convenience stores. When Couche-Tard, which operates Circle K convenience stores, approached Seven & i Holdings (SVNDY), the Japanese owner of 7-Eleven, last summer about a potential acquisition, it set off a whirlwind of activity around the struggling retail giant. Over the past year, Seven & i has fielded not only the $47 billion offer from Couche-Tard but a takeover attempt from the son of its founder. It has also seen the arrival of a new management team, led by a Japanese American retail executive who pledged to spearhead growth independently. In a letter to Seven & i’s board on Thursday, Japan time, Couche-Tard said it was withdrawing its proposal because of a lack of “sincere or constructive engagement” that would allow the deal to progress. It accused Seven & i of a “calculated campaign of obfuscation and delay.” Seven & i said in a statement that it would accept Couche-Tard’s decision, though it found the announcement “regrettable.” It also defended its actions, saying the Couche-Tard letter contained “numerous inaccurate statements” and that its special committee had engaged in “sincere and constructive discussions.” The battle for control of 7-Eleven has been widely watched as a barometer of the sweeping changes underway in corporate Japan. It’s seen as a test of how far Japanese companies, long burdened by low valuations, are willing to go to boost shareholder value. For much of the past decade, Seven & i had been at war with activist investors from the United States who argued it would be worth more if it focused solely on its core convenience stores and sold off its struggling peripheral businesses. That agitation had spurred little action. In recent years, however, more companies have been responding to pressure from Japanese officials and others to take steps — such as properly considering takeover offers — that would demonstrate an openness to reforms that might create more value for shareholders. Such efforts helped to boost the Nikkei stock index to several record highs last year, and the momentum seemed to spill over to Seven & i. In 2024, after Couche-Tard approached the company about a potential takeover, Seven & i formed an independent committee to consider the proposal. That was a markedly different response from two decades ago, when Couche-Tard first approached the company’s executives about a potential deal and was swiftly rebuffed. However, the notion of 7-Eleven, a much-loved cornerstone of Japanese society, falling to a foreign suitor was always a tough sell. In Japan, 7-Eleven is ubiquitous. People visit the stores to buy fresh foods like rice balls and hot stews and handle daily tasks such as paying bills and sending packages. Convenience stores like it are seen as so vital to daily life in Japan that the government has declared them part of the national infrastructure. Seven & i management had doubts about whether Couche-Tard could run its more than 85,000 stores across Asia and the United States better than a Japan-based team could. Earlier this year, when Seven & i appointed a new chief executive, Stephen Dacus, he brought with him several ideas for revamping Seven & i’s global operations. In March, Mr. Dacus, a former executive at Walmart and at the Uniqlo owner Fast Retailing, said Seven & i would aim to list its North American convenience-store business by the end of 2026. He said the company had reached a deal to sell some peripheral retail businesses and would repurchase over $13 billion worth of its shares by fiscal year 2030. For its part, Couche-Tard had maintained it would respect Seven & i’s methods in Japan, aiming to leverage the Japanese 7-Eleven model for its global operations. The Canadian company argued that combining forces would forge a global retail powerhouse, significantly boosting Seven & i’s shareholder value, which Couche-Tard deemed “grossly undervalued.” Seven & i shares reached a record high late last year following Couche-Tard’s offer for the Japanese retailer. The bid garnered support from a number of international investor groups, which saw the $47 billion offer for Seven & i’s shares as a generous one. Seven & i shares fell more than 7% in trading on Thursday, following news of the offer’s withdrawal. In May, both companies entered a nondisclosure agreement to advance discussions and began scouting for potential buyers for some of their overlapping U.S. convenience stores, in a bid to mitigate antitrust concerns that Seven & i management believed could hinder regulatory approval. Circle K and 7-Eleven are the biggest convenience stores in the United States, with more than 15,000 stores between them. In its Thursday letter, Couche-Tard said it saw “a clear path to U.S. regulatory approval” but that without “genuine further engagement,” it could not effectively pursue its combination plans. Seven & i said in a statement that it had collaborated with the Canadian company “sincerely” in discussions aimed at maximizing value for its shareholders and mitigating “extremely high U.S. antitrust hurdles.” Seven & i’s management will now face renewed pressure to prove to shareholders that its current leadership will be able to deliver growth and returns beyond what the Canadian retailer’s acquisition might have offered. In an April interview, Mr. Dacus, Seven & i’s chief executive, outlined plans for more aggressive investment, particularly focusing on introducing fresh food options in its U.S. stores, where profit margins have lagged behind those of rival chains. He also said that controlling costs would be important if the Trump administration’s tariffs cooled consumer demand. Last week, Seven & i reported that its net profit for the March-through-May quarter had more than doubled year-over-year, driven by a surge in overseas sales. That led to a jump in the company’s stock price. As of Thursday, after the announcement of the offer’s withdrawal, Seven & i shares were down about 16% this year, significantly underperforming the Nikkei stock average, which has gained slightly.

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