Wouldn't all those shareholders be Japanese?
Actually, no, most of their shareholders aren't Japanese. In fact, this was mentioned in the leaked Microsoft email; one of Nintendo's more aggressive shareholders is ValueAct, who used to have representation on the Microsoft board of directors. The sixth largest shareholder in Nintendo is The Vanguard Group, who are American. The second largest is the Saudi prince owned Public Investment Fund. Foreign owners make up the majority of Nintendo's investors.
Why would they have faith that Microsoft would be able to sell Nintendo products when it's well known the Japanese public aren't big fans of gaijin consoles and haven't been ever since the MSX era?
Theoretically, Microsoft would continue to sell products under Nintendo's name in Japan specifically to bypass this issue. Nintendo is seen as a Japanese brand, so the Japanese would still show loyalty to Nintendo even after a buyout. Not an uncommon tactic in acquisitions.
Its literally not possible due to the anti-trust issues.
I noted in my comment that anti-trust issues would come up, and I noted that that, more than anything else is why Phil wouldn't push for Nintendo immediately.
Or, perhaps, it would be allowed if MS were to divest Xbox and the Xbox marketplace to a third party.
More than likely, that would be a requirement for a tie up, yes.
Problem: Xbox on its own is literally a net negative and nobody will be willing to buy it.
I'm sure someone might be willing to buy it. If any company, like Steam, was looking to get involved in the sale of video game consoles, buying out Microsoft's Xbox business would make it easier to get their feet in the door.
And you can't just shut it down or spin it off into a nonviable company and keep the Switch 2 instead because that would still be seen as decreasing competition.
Sure they could. There's nothing stopping them from spinning off the business if its draining money, or shutting it down wholesale. Microsoft can do whatever they want with their own business. If they were trying to buy Nintendo, they might even divest the business prior to any deal even being discussed or made public.
Phil's e-mail eludes to it, Nintendo's future, to him, is off their own hardware but he can't even attempt to buy them until they go there voluntarily.
I read that more as Phil believing that Nintendo will flounder eventually simply because they can't compete with them and Sony. Of course, these emails are from 2020, before the Switch just utterly dominated the competition. The bigger issue Phil cited was that Nintendo has large cash reserves and a board that isn't interested in market growth or stock appreciation, so would be unlikely to even consider a merger in the first place. That's why he saw ValueAct increasing its holdings in Nintendo as a major opportunity, because they would put pressure on Nintendo's board regarding these things, creating opportunities for outside interests.