Retailer Aeon Co. said Tuesday it has dissolved a capital and business alliance with Drug Eleven due to a controversy over the drugstore chain's accounting practices.
Aeon, which holds a 20 percent stake in Drug Eleven, said it came to the decision after the Fukuoka-based chain failed to clear up questions over its accounting practices in the business year that ended Feb. 15.
According to Aeon, Drug Eleven was requested by its auditor to correct its inventory booking, and as a result its liabilities exceeded assets by 100 million yen.
Aeon demanded that Drug Eleven fully explain the situation, accept a proposal to reshuffle management and implement reform programs, including cuts in interest-bearing debts.
Drug Eleven failed to respond, prompting Aeon to dissolve the tieup as of Monday, Aeon officials said.
Aeon, which operates the Jusco supermarket chain, said it will withdraw its 20 percent stake in Drug Eleven, and the executives it sent there will be called back. Drug Eleven joined the Aeon group in 1999.