Announcing an alliance that will create Japan’s largest retail group, supermarket chain Aeon said today (9 March) that it has invested JPY46.2bn (US$395.5m) to obtain a 15% stake in troubled retailer Daiei.
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Daiei has been seeking to revive its fortunes through a partnership after the company’s financial collapse in 2004. Daiei had borrowed extensively to fund rapid expansion during the 1980s, and when the Japanese retail bubble burst in the 1990s the company was left with debts of more than JPY2trn. In 2004, the company turned to the state-baked corporate rehabilitation body. It is hoped that management input from and cooperation with Aeon will hasten the company’s recovery.
Under the agreement, Aeon has purchased shares from Daiei’s largest stockholder Marubeni Corporation, who held a 44.6% stake in the company before the deal.
Aeon will purchase a 20% stake in supermarket operator Maruetsu form Daiei for JPY16.5bn. Aeon and Marubeni will also buy JPY10bn worth of stocks in each other within three months.
Both purchases are expected to be completed by the end of the month, Aeon said.
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By GlobalDataThe combined annual sales of Aeon, Daiei and Maruetsu will exceed JPY6trn, surpassing 7-Eleven operator Seven & I, which currently posts annual sales of around JPY5.5trn.
“By bringing together the Aeon group and Daiei group, a retail alliance surpassing JPY6trn in sales will be born,” the companies said in a joint statement. “The groups will take up challenges that exploit our edge in size, share our business assets and know-how to speed up on reforms that will boost efficiency.”
Two Aeon executives will join Daiei’s board, which currently consists of nine members.
Aeon shares closed up 4.6% at JPY2,400, while Daiei shares jumped 9.8% to JPY1,689.
