Alimentation Couche-Tard Inc’s proposed acquisition of Seven & i Holdings Co, if successful, wouldn’t just be the largest takeover of a Japanese company. It would also be extremely rare.

The Canadian convenience store chain operator’s preliminary proposal to buy 7-Eleven owner Seven & i Holdings Co could be worth more than ¥5.63 trillion (US$38.4 billion or RM167.9 billion), based on the Japanese company’s market value after news of the potential deal was disclosed.

Until now, an attempt to acquire such a well-known Japanese business at such scale would have been dismissed as audacious and unlikely, given the protectionist tendencies of the government and corporate boards prioritising stability over shareholder value. But the tide may be turning, with new corporate guidelines aimed at injecting more vigor into corporate Japan through improved governance and protections for investors.

It’s not clear yet how much Couche-Tard, which is smaller than Seven & i, may propose to pay and structure any potential deal, or whether it is seeking a partial or complete buyout. Still, the Canadian company’s plan will benefit from a potential ally: ValueAct Capital Management LP.

The activist fund has been pushing Seven & i’s management to narrow its focus to 7-Eleven stores, saying last year that they would be worth more as a standalone listed company, and sought to replace chief executive officer Ryuichi Isaka last year. In response, he has taken restructuring measures and initiated a buyback. But given the reaction among investors who bid up the company’s shares by 23% on Monday when the news broke, a record one-day gain for the stock, it may be hard to justify any pushback to an attractive takeover proposal.

“The main implication is that the stock is clearly undervalued,” said Rafael Nemet-Nejat a senior portfolio manager at Jin Investment Management Pte. The proposal “may also put pressure on the company to speed up restructuring as well, as the management is likely reluctant on foreign buyouts.”

If Couche-Tard ends up making a partial bid, gains could be limited and the shares could even drop, Nemet-Nejat added. In a sign of investor skepticism, Seven & i fell 11% Tuesday, paring the previous day’s record gain.

It’s not clear whether ValueAct still holds any stock in Seven & i, based on data compiled by Bloomberg, which shows that they no longer own a stake. The investor, which had previously disclosed a 4.4% holding in the Japanese company, may still have significant positions in part or in full through swap arrangements with brokers, which do not require stock exchange disclosure.

If successful, a Couche-Tard takeover of Seven & i would eclipse KKR & Co’s ¥670 billion deal in 2022 to buy Hitachi Transport System Ltd, which at the time the biggest full takeover by a listed Japanese business by a foreign entity. In that transaction, the private equity firm benefitted from parent Hitachi Ltd’s desire to divest assets to focus on its core businesses.

But the history of attempted takeovers of Japanese companies by outsiders is messier.

KKR, CVC Capital Partners and Blackstone Inc walked away from a buyout of Toshiba Corp after meeting stiff resistance from management. Concerns about the valuation, complexity and political nature of the deal were all headwinds that eventually resulted in a consortium led by a domestic fund prevailing last September.

Hon Hai Precision Industry Co, better known as Foxconn, pulled off a deal in 2016 to take a controlling stake in Japanese electronics maker Sharp Corp for ¥389 billion. The Taiwanese electronics contract manufacturer had pursued the Japanese company for years. Foxconn founder Terry Gou had lobbied Japanese lawmakers, co-opted banks and sweetened its offer to outmaneuver a Japanese government-backed bidder.

Three years ago, Chinese home appliance maker Guangdong Galanz Enterprise Co became the single biggest shareholder in rice-cooker maker Zojirushi Corp and sought to appoint new directors, but was rejected. The Japanese company subsequently adopted a “poison pill” defense against a potential takeover in 2022.

By the numbers, Couche-Tard’s proposal to buy Seven & i provides a murkier picture. Although Couche-Tard is smaller than Seven & i, with about 16,700 stores compared with more than 85,000 for the Japanese retailer, the Canadian company enjoys a bigger valuation of about US$58.5 billion.

Couche-Tard also carries more debt, and has less cash on hand than Seven & i. The yen’s decline, coupled with a 21% drop in 7-Eleven owner’s stock since the end of February, also made the company more attractive to a possible suitor.

Even so, based on a multiple of 11.5 times earnings before interest, taxes, depreciation and amortisation, the deal value could go up to as much as US$86 billion, wrote Bloomberg Intelligence analyst Diana Rosero-Pena.

Any proposal or formal offer will have to be attractive enough for Isaka and the board to take it seriously, according to Amir Anvarzadeh, a strategist at Asymmetric Advisors Pte.

“Anything above ¥7 trillion, management would be under a lot of pressure, particularly by activist investors that have invested in the company,” Anvarzadeh said.