Daiei Inc.’s decision to seek help from the Industrial Revitalization Corp. of Japan is widely believed to have intensified a scramble for the retailer’s outlets and may result in a major change in power relations in the supermarket industry.
The state-backed IRCJ’s takeover of Daiei is expected to lead to the breakup of the retailer and the sale of its core food retailing business to sponsors.
The IRCJ is currently selecting sponsor companies to help Daiei improve its earnings; among prospective candidates are Aeon Co. and Ito-Yokado Co.
Before Daiei agreed to turn to the IRCJ for help, its three main creditor banks had been informally discussing ways to support Daiei with the two supermarket chain operators.
Industry leader Aeon, in particular, is seen as a powerful candidate, as the company has a good track record of successfully taking over failed supermarket chains, such as Yaohan and Mycal.
The other candidates are four groups of companies that entered the bidding for a public offering held by Daiei to raise 100 billion yen on Aug. 20.
Among them are an alliance between Japanese trading house Marubeni Corp. and Deutsche Securities and a group of major U.S. retailer Wal-Mart Stores Inc. and U.S. investment bank Goldman Sachs.
Wal-Mart already operates in Canada and Germany. It purchased Japanese retailer Seiyu Ltd. in 2002, though Seiyu’s performance leaves something to be desired.
Therefore, the U.S. retail giant is intent on strengthening its position in Japan by taking a stake in Daiei.
Wal-Mart drew attention earlier this month when its executives secretly visited Japan.
According to industry sources, Wal-Mart “has virtually agreed” with Marubeni to form a “Japan-U.S. alliance” to support Daiei.
Daiei owns 263 outlets across Japan.
Although obsolete, many of them are in favorable geographical locations, such as in front of railway stations. So there will be fierce competition for the Daiei stores, involving local supermarkets.
Prior Daiei President Kunio Takagi was confident in his plan to turn the retailer around without help from the public entity, saying that the retailer’s “business value” was high.
Ironically, Daiei’s attractiveness and the unintended use of the IRCJ for rehabilitation have combined to raise the specter of what Takagi was most afraid — the demise of the Daiei empire.
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