Yoshifumi Nishikawa, president of Sumitomo Mitsui Financial Group Inc., said Wednesday that supermarket chain operator Daiei Inc. has no alternative but to seek help from the state-backed Industrial Revitalization Corp. of Japan for its revival.

Nishikawa also said SMFG will continue to press ahead with a proposed merger with smaller ailing rival UFJ Holdings Inc.

“Daiei must be turned around in a short time under a program that ensures its revival,” he said. “It is indispensable to achieve the rehabilitation in a transparent and speedy manner.

“There is no choice but to use the IRCJ.”

Daiei’s three big creditor banks — UFJ Bank, Mizuho Corporate Bank and Sumitomo Mitsui Banking Corp., a Sumitomo Mitsui group unit — are collectively urging Daiei to turn to the IRCJ for assistance, a move that Daiei has staunchly resisted.

On Friday, Daiei presented the lenders with a revised program to turn its business around without IRCJ help.

Nishikawa said the market will not support backroom talks among the main banks over the course of Daiei’s rehabilitation and that their shareholders could even move to sue them should they provide fresh financial assistance to Daiei without the IRCJ’s involvement.

Turning to SMFG’s bid for a merger with UFJ, Nishikawa said the SMFG-UFJ combination would be stronger in terms of managerial efficiency and profitability than a banking group to be born after a merger of Mitsubishi Tokyo Financial Group Inc. and UFJ.

On Tuesday, SMFG offered a merger with UFJ on an equal footing in competition with MTFG for a tieup that would create the world’s largest banking group.

“We offered the one-to-one stock ratio for a merger with UFJ after considering its benefits for Sumitomo Mitsui shareholders,” Nishikawa said.

SMFG made the offer even though UFJ signed a basic agreement with MTFG on Aug. 12 to integrate their banking, trust banking and brokerage operations under a holding company by Oct. 1, 2005.

Split plan tabled

The Industrial Revitalization Corp. of Japan plans to revive ailing retailer Daiei Inc. by splitting it into a supermarket chain specializing in foods and a company tasked with managing its stores and land holdings, according to sources.

The IRCJ also plans to contribute 100 billion yen to 200 billion yen in capital jointly with sponsor companies to help Daiei improve its earnings by refurbishing its existing outlets on a grand scale, the sources said.

Daiei is meanwhile sticking to its own revival plan, which does not involve the IRCJ, although its three main creditor banks have been urging it to accept the governmental entity’s help.

The IRCJ considers its plan acceptable to Daiei because, as a food-based supermarket chain rather than a full-line merchandise chain as it now is, the company can secure more employment per sales floor area.

IRCJ hopes Daiei can improve competitiveness by having specialty food shops occupy floor space vacated by its clothing and apparel, household equipment and other nonfood lines.

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