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Department store operators Takashimaya Co. and H2O Retailing Corp. said Thursday they have canceled their plan to merge after apparently failing to agree on a common strategy to lift their struggling businesses.

But Takashimaya and H2O, which has Hankyu Hanshin Department Stores Inc. under its wing, said they will continue to enhance their business cooperation in areas such as joint product development and procurement of materials.

The merger deal would have created a group with combined sales of nearly ¥1.5 trillion, rivaling industry leader Isetan Mitsukoshi Holdings Ltd.

At a news conference, H2O Retailing Chairman and Chief Executive Officer Shunichi Sugioka said, “There were differences over strategies for store development, so we decided it would be better to cooperate in areas that produce benefits instead of integrating in a half-baked manner.”

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