Seven & i and Alimentation Couche-Tard: Lessons from a broken cross-border deal in Japan’s season of corporate governance change

If “the proof of the pudding is in the eating”, Japan’s corporate governance reform—long seen as a slow-moving ambition—is finally showing its flavour. Institutional investors and global asset managers have long scrutinised Japanese boardrooms for signs of real shareholder value generation. It seems their patience is finally yielding slow but positive results— Japan is driving Asia's M&A rebound in 2025 with a record $232 billion worth of deals in the first six months, more than triple the same period last year, and bankers expect the trend to continue in the second half.¹

At this year’s annual general meetings (AGMs), a record seven firms saw shareholder proposals succeed, with companies such as Tokyo Cosmos Electric and Taiyo Holdings witnessing complete director overhauls or CEO change driven by investor action. Meanwhile, support for managerial proposals is weakening: 30 corporate motions were rejected—mostly involving director nominations—up from just six the previous year. Whilst the journey towards stronger corporate governance is not linear and Japan still needs to address market-specific challenges such as the threatened use of poison pills, these trends indicate a shift in investor behaviour from passive support towards active engagement.²

The terminated acquisition attempt by Canadian firm Alimentation Couche-Tard (ACT) for Seven & i Holdings, the Japanese conglomerate behind the global 7-Eleven convenience store chain underscores both persistent challenges and the complexities of cross-border mergers and acquisitions (M&A). While shareholder activism and Tokyo Stock Exchange (TSE) reforms have strengthened board accountability, cultural resistance from Japanese management and strategic miscalculations by foreign acquirers hinder successful cross-border deal making.

This evolving context makes the collapse of ACT’s cross-border bid for Seven & i both a cautionary tale and a reflection of the current state of corporate change in Japan. The broken deal brings to the fore recurring themes: how far governance and engagement have come, but also the limitations—of both Japanese boards and foreign suitors—in converting process into value. What follows is an analysis not just of actions on both sides but of the broader systemic friction that continues to shape Japanese cross-border dealmaking in 2025.

Anatomy of a failed takeover: facts, claims, and fallout

ACT, Canada’s retail convenience giant, entered into lengthy negotiations to acquire Seven & i in a complex transaction valued at around ¥2,600 per share ³ —a 47.6% premium to the undisturbed price. This was not the first round: earlier bids had been summarily rebuffed or deemed opportunistic and undervalued by the Seven & i board. After nearly a year of negotiation, ACT withdrew its offer, publishing an adversarial letter ⁴ accusing Seven & i’s management of obfuscation, delay and a lack of genuine engagement. The result was an immediate 12.5% drop in Seven & i’s share price over the next two days, wiping away billions in value and leaving shareholders questioning both parties’ motives and commitment to shareholder value.

A decade of activist pressure and persistent calls for reform

Seven & i Holdings has faced sustained pressure from activist investors over the past decade, primarily aimed at addressing its conglomerate structure, underperforming assets and governance issues. Notably, Daniel Loeb’s Third Point hedge fund began accumulating a stake in the company in 2015, publicly criticizing its complex conglomerate structure and calling for a spin-off of underperforming units including Ito-Yokado, Seven & i’s diversified retail business. Loeb’s pressure for reform reached a climax in 2016, when his campaign against what was described as nepotism and weak succession planning contributed to the ousting of long-term CEO Toshifumi Suzuki and the elevation of Ryuichi Isaka as president. Nevertheless, Loeb and Third Point eventually scaled back their engagement after seeing board changes though without achieving full structural reform.

Following Third Point’s campaign, ValueAct Capital emerged as perhaps the most persistent and high-profile activist targeting Seven & i. Starting in 2021, ValueAct urged Seven & i to prioritize its high-margin 7-Eleven business, pushing for a strategy which valued each business unit independently and pressing for the divestment of underperforming assets such as Ito-Yokado, or even a full break up, to unlock greater shareholder value.

ValueAct’s Capital’s engagement with Seven & i intensified in 2022 and 2023, culminating in direct challenges to the board and robust advocacy for change at shareholder meetings, including proposing a slate of seven new directors in 2023. Although a comprehensive restructuring was not achieved, Seven & i responded by appointing six independent directors between 2021 and 2023 to strengthen board independence and governance.

The diagram below shows history of activism at Seven and i from 2015 to 2022, sourced from ValueAct’s 2022 presentation. ⁵

A new paradigm for corporate governance in Japan

In 2023, the Japanese Ministry of Economy, Trade and Industry (METI) released their "Guidelines for Corporate Takeovers – Enhancing Corporate Value and Securing Shareholders' Interests". ⁶  These guidelines aim to foster constructive M&A transactions, particularly unsolicited offers, by encouraging boards to carefully evaluate genuine offers in good faith and promoting increased transparency throughout the process. The guidelines are not legally binding but are intended to establish principles and best practices for Japan’s business community. In 2025, Asia’s M&A activity reached $650 billion, doubling the previous year’s total. Japan led the region with a record $232 billion in deals, representing more than one-third of Asia-Pacific’s deal value and significantly outpacing all other Asian markets. ⁷

Evaluation of a failed transaction: responsibility on both sides

In line with METI’s 2023 Guidelines, Seven and i followed the required procedures in responding to the ACT bid, resulting in shared responsibility between both parties for the deal’s failure. Below, we analyse key shortcomings on both sides of the failed deal.

Analysis – Seven & i ‘s response to the ACT bid

• “Tick the box” over substance: Seven & i established a Special Committee composed of independent directors and formally adhered to required processes. However, global investors and activists have criticized the board for a lack of true engagement, limited transparency and cosmetic reforms focused more on procedural compliance than substantive dialogue or accountability. In its letter, ACT has highlighted an unwillingness to embrace open boardroom dialogue, take risks, or meaningfully consider outside proposals—despite the changing winds of Japanese corporate governance.

• Founding family’s efforts to retain control: The Ito family, founders of Seven & I, sought to preserve their influence over the company’s strategic direction amid external pressure. ⁸ In 2024, led by Junro Ito and supported by the family’s asset firm, Ito-Kogyo, they pursued a management buyout (MBO) valued at over $50 billion, hoping to counter the takeover bid from ACT. However, the MBO faltered due to insufficient financing and withdrawal of key potential partners, including Itochu, marking a significant setback for the family’s legacy driven strategy. 

How did Couche-Tard misstep?

• Cultural unpreparedness: The Canadian bidder underestimated the cultural, strategic, emotional, and process-related sensitivities that come with a Japanese deal of this magnitude. Aggressive tactics, such as the publication of a sharply accusatory letter in September 2024, criticizing Seven & i’s board for obstructionism and efforts to leverage international shareholder frustration landed poorly with both Seven & i’s board and wider Japanese stakeholders, enabling management to adopt a defensive stance rather than fostering constructive dialogue.

• Slow and hostile approach: ACT only signed the requisite NDA nine months after its initial proposal, delaying the start of meaningful due diligence and allowing uncertainty to persist. Furthermore, ACT’s $1.2bn break fee, whilst substantial in absolute terms, equated to just 2% of deal value – a relatively modest percentage at the lower end of the range for cross-border deals of this scale, raising questions about its commitment among Japanese stakeholders.

• ACT’s critique and mutual misalignment: Instead of constructive negotiation, both sides engaged in back-and-forth rebuttals and public accusations. Insiders at Seven & i have noted that some of ACT’s complaints (such as lack of access to information) were the result of self-inflicted delays, while outsiders viewed the entire episode as an example of failed cross-cultural communication and alignment.

Governance, reform, and the future of Japanese corporate takeovers

Reforms are progressing—but more is needed

Progress this year has shown that Japan’s governance reforms are real and growing stronger. Regulation and investor pressure now mandate tougher rules around independent valuations, minority protection, and disclosure. Shareholder proposals are being heard and, occasionally, adopted. Crucially, in the case of Seven & i, authorities like METI chose not to block the deal, showing willingness, at least in principle, to countenance major corporate change—even one that might once have triggered “protectionist” accusations.

Yet, the process still suffers from entrenched flaws:

• Gaps in due diligence rules: The Japanese market still lacks clear, codified rules for information sharing and timeline discipline in contested or sensitive M&A—hindering both local and foreign bidders.

• Fiduciary duty for directors to shareholders in company law: In line with recent amendments to commercial law in Korea, one proposal is to introduce explicit accountability to shareholders at the board level by enshrining this responsibility in company law. While embedding fiduciary duties in law may appear to strengthen board accountability, it does not automatically ensure a move away from a “box ticking” approach. To be effective, any change must not only clarify legal obligations but also lead to actual practice that boards fully consider both the spirit and letter of fiduciary responsibilities.

The revised TSE Code of Corporate Conduct ⁹, effective 22 July 2025, introduces several pivotal measures designed to bolster minority shareholder protections and enhance transparency in Japanese corporate governance. Key provisions include mandatory independent fairness opinions for major transactions such as cash-outs, MBOs, and take-private deals—ensuring that these actions do not undermine minority interests. The Code also stipulates more robust and timely disclosure requirements, particularly regarding the assumptions underpinning share value calculations and the processes used to reach crucial decisions.

The table below sets out examples of cross-border deals during the previous two years, through the lens of these newly issued guidelines.

Cross-border Japanese M&A — Selected major cases

In light of recent regulatory developments and evolving corporate governance practices in Japan, what key lessons can Seven & i Holdings and ACT draw from these challenges? Specifically, what alternative actions could Seven & i or ACT have taken to address these issues more effectively?

What ACT could have done differently

• Early engagement and cultural sensitivity: Preparing for, and prioritising, Japanese norms of consensus and transparency could have built trust and led to a smoother dialogue. ACT’s “deal first, process later” approach backfired.

• Stronger commitment to protect deals: A larger break fee, earlier information flow, and clearer regulatory risk-sharing would have signaled greater conviction and reduced grounds for rejection.

• Partner or persuade, don’t provoke: Collaborative appeals and confidentiality—rather than broadcast accusations and hostility—remain key when trying to rally both board and shareholder support in Japan.

What Seven & i needs to do now

• Deliver on the standalone plan: Management has promised about ¥2trn in share buybacks by FY2030, funded via asset sales (such as the divestment of York Holdings) and a possible equity offering of its North American business. Having the independent chairman Stephen Dacus taking over the CEO position is not necessarily unorthodox from a governance perspective, but this strategy will need to be proven over time.

• Genuine shareholder engagement: Seven & i must prove its new strategy is not simply a defensive manoeuvre. Credibility hinges on clear milestones, open communication, and meaningful board and management renewal. The era of “we know best” management is over. Board culture and governance at Seven & i must evolve from box-ticking to actual engagement, including being open to credible external suitors or alliances if shareholder value justifies it.

A new era for corporate Japan—if traditional practices evolve

The breakdown of the Seven & i and ACT deal, for all its drama, shows how far Japan has come—and how far some companies still have to go. Shareholders are mobilising as never before, reforms are making their mark, and even government has become more hands-off with major international M&A.

Real change means moving beyond simply following new rules. The path forward requires Japanese boards to see active investor pressure as the new normal, rather than a threat. It means foreign buyers must respect local nuance and bring more than just capital—or risk facing similar issues as ACT. Japanese corporates have to match the aspirations of regulators in both spirit and letter. If Seven & i learns these lessons, it can still deliver long-term corporate value for shareholders, whether by proving its standalone plan or, in future, welcoming a better-prepared outsider.
 

Footnotes:

1. https://www.tesaaworld.com/en/news/japan-leads-mergers-and-acquisitions-deals-in-asia-in-2025-with-record-numbers 
2. https://www.bloomberg.com/news/articles/2025-07-13/corporate-japan-s-shareholders-show-more-clout-this-agm-season .
3. This offer was put forwards in January 2025.
4. https://corporate.couche-tard.com/2025-07-16-ALIMENTATION-COUCHE-TARD-ANNOUNCES-WITHDRAWAL-OF-PROPOSAL-TO-ACQUIRE-SEVEN-I-HOLDINGS-DUE-TO-LACK-OF-ENGAGEMENT Source:
5. https://valueact.com/wp-content/uploads/2022/02/Seven-i-Holdings-Public-Presentation-vF.3.pdf
6. https://www.meti.go.jp/english/press/2023/0831_001.html
7. https://www.tesaaworld.com/en/news/japan-leads-mergers-and-acquisitions-deals-in-asia-in-2025-with-record-numbers
8. https://www.7andi.com/library/dbps_data/_material_/localhost/en/release_pdf/2024_1113_ir01en.pdf
9. https://www.jpx.co.jp/english/rules-participants/rules/revise/sjcobq000001tgf4-att/outline.pdf
10. https://www.hklaw.com/en/insights/publications/2025/06/nippon-steel-and-us-steel-announce-finalized-merger-agreement