Japan Sells Its Soul: How 7-Eleven’s Takeover Marks the End of Japan Inc.

 

Japan’s economic stagnation has driven it to the point where even its most iconic brands are being sold off to foreign interests, signaling the nation's decline as a global power.

It looks like Japan’s beloved konbini might soon be under new management, and that is raising eyebrows in boardrooms and break rooms alike. It is a little ironic, isn’t it? The same country that perfected the convenience store model with 7-Eleven, might just be handing over the keys to a Canadian retailer. This isn’t just about a business deal—it is a signal of Japan’s shifting corporate culture, and some might say, a surrender of its economic sovereignty.

Alimentation Couche-Tard (ACT), the Canadian giant behind Circle K, made an audacious move by offering to buy Seven & i Holdings, the parent company of 7-Eleven. This isn’t just any offer—it could become the largest foreign takeover of a Japanese company in history. Imagine that, the global titan of convenience stores might no longer be Japanese, but Canadian. For a country that’s so proud of its homegrown brands, this potential acquisition speaks volumes about the changing tides in Japanese business practices.

But how did we get here? Let’s rewind a bit. For years, American activist investors like Third Point and ValueAct Capital have been putting the heat on Seven & i to streamline its operations. They’ve been relentless, pushing the company to focus on its core convenience store business. It’s no secret that Japan’s population is aging, and with that comes stagnation in domestic market growth. Seven & i realized this and began selling off parts of its empire, like Sogo & Seibu and downsizing Ito-Yokado, to focus on expanding its convenience store business internationally. They even outbid ACT in 2020 to acquire Speedway, a network of American petrol stations.

But despite these moves, the market wasn’t impressed. Seven & i’s shares were down by 6% this year, while the broader Nikkei index saw a 14% rise. Add to that a weaker yen, and the company’s valuation took a hit in dollar terms. ACT, on the other hand, has been thriving. Despite having fewer stores and lower sales, the Canadian company is far more profitable, with a return on capital of 10%, compared to Seven & i’s meager 4%. Their market value? A whopping $56 billion, dwarfing the Japanese company.

This disparity created a perfect storm for ACT to swoop in. Known for its aggressive growth strategy, ACT has built more than 70% of its store network through acquisitions, and they’ve set an ambitious goal to nearly double their gross operating profit to $10 billion by 2028. Acquiring 7-Eleven would be a massive leap towards achieving that goal. Investors seem to agree—Seven & i’s shares skyrocketed by 23% after the takeover announcement.

But let’s not pop the champagne just yet. There are a few hurdles to clear. For starters, Seven & i’s board might reject the offer. And even if they don’t, regulators could step in. In the United States, 7-Eleven and ACT already dominate the convenience store market with around 20,000 outlets combined. The next largest competitor, Casey’s, has less than 3,000. The U.S. government might have something to say about such a consolidation. Remember what happened when ACT tried to buy Carrefour in 2021? The French government blocked the deal, citing food security concerns. Japan might follow suit, especially since konbini play a crucial role in disaster relief efforts. The Japanese government could argue that foreign control might jeopardize this vital function.

Regardless of the outcome, this bid is a watershed moment. Japan’s corporate governance has been slowly evolving since former Prime Minister Shinzo Abe’s reforms in 2013. These reforms have pushed Japanese companies to become more shareholder-friendly, and more open to mergers and acquisitions. The fact that Seven & i didn’t outright reject ACT’s offer is a testament to how much has changed. The company’s board formed a special committee of outside directors to carefully review the offer—a move that would have been unthinkable just a decade ago.

Yet, this deal also raises uncomfortable questions about Japan’s future. Alain Bouchard, ACT’s founder, has long dreamed of acquiring 7-Eleven. Back in 2005, he flew to Tokyo to persuade Ito Masatoshi, the man who brought 7-Eleven to Japan, to sell the American part of the business. Ito refused, famously saying, “The Japanese aren’t sellers.” Fast forward to today, and that once steadfast stance seems to be crumbling. What does it say about Japan when one of its most iconic brands is up for grabs?

Perhaps this deal signals a deeper issue within Japan’s economy. The country’s businesses are facing intense pressure from foreign investors, and with an aging population and stagnant growth, they’re struggling to stay competitive. Japan’s willingness to entertain such a monumental takeover might be seen as a sign of desperation, a move to keep up with global players even if it means sacrificing a piece of its national identity.

In the end, whether this deal goes through or not, it’s clear that Japan’s economic landscape is undergoing a transformation. The country that once prided itself on being an economic powerhouse now finds itself at the mercy of foreign interests. And if Japan isn’t careful, it might just sell off more than it bargained for.

So, as Japan contemplates handing over its beloved 7-Eleven to a foreign power, one can’t help but wonder—is this the beginning of the end for Japan Inc.? Or is it just another example of how, in today’s globalized world, even the most sacred of institutions are up for sale? Either way, it seems Japan’s corporate culture is getting a makeover, whether it likes it or not. After all, when the convenience store that perfected the rice ball might no longer be Japanese, you have to ask—what’s next on the chopping block?