TOKYO, July 18 (Reuters) - Alimentation Couche-Tard's ( ANCTF )

attempt to create a global convenience store behemoth

was set back when it pulled its $46 billion bid for Seven & i ( SVNDF )

, whose consumers in Japan have emotional ties to their

purveyor of rice balls.

The Canadian company, which owns Circle-K, withdrew its bid on

Thursday after a year-long pursuit, citing "a calculated

campaign of obfuscation and delay" by the Seven-Eleven operator

and lack of engagement by its founding Ito family.

Couche-Tard first disclosed the proposal in August last

year, with Seven & i ( SVNDF ) under pressure from shareholders to boost

returns by selling off assets and focusing on its mainstay

convenience store business.

"ACT bid at just the right time... when Seven was at its

weakest," said Michael Causton of consultancy JapanConsuming.

The possibility of a takeover quickly sparked concern about

whether the Seven-Eleven operator's fresh food would be

affected. It also generated debate about Japan's openness to

foreign takeovers.

Convenience stores are an important resource in Japan during

natural disasters, but Seven-Eleven's massive global presence

made it a target for Couche-Tard.

With Seven & i ( SVNDF ) looking to avoid a takeover, it changed its

self-reported national security category to "core" in September,

a step which raised questions as to whether it was a defensive

manoeuvre.

In private, it emphasised its importance to Japan's economic

security to the government, three sources familiar with the

matter said. Seven & i ( SVNDF ) declined to comment.

The Canadian company hiked its proposal price in October,

with Seven & i ( SVNDF ) revealing plans to hive off assets the same

month. The Japanese firm also announced plans to list its North

America business.

"It has sparked the management into being more proactive,"

said Lorraine Tan, an analyst at Morningstar.

The company had expressed concerns about the regulatory

hurdles to a deal.

"Couche-Tard seemed to want to iron out the details after

Seven & i ( SVNDF ) had agreed to the deal," said Travis Lundy, an analyst

who publishes on Smartkarma.

PROLONGED NEGOTIATIONS

Couche-Tard's approach appeared to gain a tailwind when an

attempt by the Ito founding family to buy Seven & i ( SVNDF ) collapsed in

February after failing to secure funding.

Then, after initially providing little public explanation

for pursuing the deal, Couche-Tard in March made a publicity

push for the combination emphasising its financial credentials.

However, the Canadian retailer faced growing challenges

including lacklustre retail spending in the U.S., with its stock

price sliding between the end of last year and Wednesday's

close.

"Couche-Tard may have realised that the cost cannot justify

the risks, including prolonged negotiations and uncertain

business prospects," said Tatsunori Kawai, chief strategist at

Mitsubishi UFJ eSmart Securities.

Its shares jumped 8% on Thursday after withdrawing the bid.

"To continue further... would ultimately be a lost

opportunity for its own growth," said Takahiro Kazahaya, an

analyst at UBS.

Analysts are also questioning how Seven & i ( SVNDF ), famed for its

ready meals, will drive further growth.

On Thursday, Natsuko Douglas, an analyst at Macquarie

Capital, downgraded Seven & i ( SVNDF ) to neutral from outperform, citing

unclear benefits from the planned listing of the North America

business.

"Full recovery is a long time away," she wrote in a note.

The planned listing is "something they probably don't want

to do but were prepared to do to get rid of Couche-Tard," said

Tom Leske, director at Churchill Capital.

Industry experts point to Seven & i's ( SVNDF ) strengths, honed over

decades in Japan's bruising retail market, which has proved

tough for many foreign entrants.

"Seven globally will be giving competitors a hard time once

it has its ducks in a row," said JapanConsuming's Causton.