Shareholders at their annual general meeting approved all 10 candidates nominated by the company and rejected all five outside director nominees backed by Hong Kong-based Oasis Management, Tsuruha said in a statement.

The proxy battle was about who should be on the board to lead a successful M&A (mergers and acquisitions) strategy when investors widely expect more consolidation among Japan's fragmented drugstore industry.

Oasis argued that the current board dominated by founding family members could impede the company from fairly evaluating consolidation opportunities, while Tsuruha said the board already has industry insiders with knowledge and networks which it needs to pursue the best M&A strategy.

Retail giant Aeon, Tsuruha's largest shareholder with a 13% stake, said before the meeting it would support Tsuruha.

Placing the drugstore business as one of key growth drivers, Aeon also owns 51% of Welcia Holdings and 10% of Kusuri No Aoki Holdings.

(Reporting by Makiko Yamazaki; Editing by Simon Cameron-Moore)