Home improvement retailer DCM Holdings said on Friday it has made an offer for smaller rival Shimachu Co. for ¥164 billion, which would give it a greater presence in the Tokyo region.
DCM, the operator of Homac and other do-it-yourself stores, said it would seek to buy all the shares of Shimachu through a tender offer at ¥4,200 per share, a 19 percent premium compared to Friday’s closing price. Shimachu said it would support DCM’s offer as it would gain synergies by being acquired.
Buying Shimachu would give DCM bigger scale in a difficult retail environment.
“Our business outlook is unclear and severe,” DCM said in a statement. “Consumption has lost momentum and it could be hurt further because of the government requests for limiting outings and business closures.”
Japan is bracing for its worst post-World War II recession after closure requests to keep some businesses shut depressed consumer spending. The unemployment rate rose to its highest in over three years in August.
DCM operates 677 outlets nationwide under various affiliates, while Shimachu has about 60 outlets mainly in the greater Tokyo region, according to the two companies.
The tender offer will run from Monday through Nov. 16.
Sales at DCM, the second-biggest industry player in Japan, for the year that ended in February stood at ¥437.4 billion, while those at Shimachu, which ranked seventh, came to ¥153.5 billion for the year that ended in August.
Following the integration, the two companies will dethrone current industry leader Cainz, whose sales for the year through February totaled ¥441 billion.
“Shimachu complements us well in terms of regions and operations and is very attractive,” Yasunori Ishiguro, president of DCM, told a news conference.
Shimachu President Takaaki Okano said, “We can expect to improve profitability by strengthening product development capabilities and taking advantage of the bigger size.”
There is only limited overlap in the regions where DCM and Shimachu run outlets.
DCM hopes to boost its product lineup by acquiring Shimachu, which is strong in the furniture sector. Shimachu aims to shore up its profitability by introducing DCM brand goods.