• Reuters, Kyodo, Staff Report

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Electronics retailer Yamada Denki Co. will take over home furnishing store Otsuka Kagu, the companies said Thursday, after the furniture chain struggled to compete with cheaper rivals and overcome a family-and-boardroom feud.

Otsuka Kagu, which could run out of cash in several months, will issue ¥4.3 billion ($39.58 million) in new shares to Yamada Denki, giving it 51.74 percent of the company, they said.

While the move is set to dilute the value of existing shares, Otsuka’s stock shot up 31 percent — their daily limit — to close at ¥212.

Since Yamada Denki and Otsuka Kagu agreed on a business tie-up in February this year, the furniture retailer has provided personnel and furniture sales expertise to the electronics chain, which has been focusing on its housing arm.

Otsuka Kagu said in a statement that it believes the partnership with Yamada Denki “will help improve the brand image of the firm as a quality furniture retailer, so deepening the ties with Yamada Denki is the best choice to increase the sales and performance in our domestic business.”

The firm said it plans to spend ¥1.3 billion on advertising in the next three years to reconstruct the brand image, while strengthening its online business by possibly selling furniture on Yamada Denki’s online store.

Already suffering from tough competition from cheaper furniture stores such as Nitori Holdings and global chain Ikea, Otsuka Kagu failed to recover from negative publicity over a battle between the company’s founder, Katsuhisa Otsuka, and his daughter and now-CEO Kumiko Otsuka.

The pair’s power struggle, rooted in differences over company strategy, led to a proxy battle in 2015 and an emotional showdown that was played out on national television.

Otsuka Kagu was known for selling premium furniture through consulting services but Kumiko wanted to promote more midpriced products to widen its customer base amid competition from more reasonably priced rivals. Katsuhisa had stressed that Otsuka Kagu should not change its focus.

The retailer posted a net loss of ¥3.2 billion for the fiscal year ended in December 2018, mired in the red for the third consecutive year.

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