Private equity group KKR to acquire 65%, and Japanese e-commerce company Rakuten to buy 20% of Seiyu, one of Japan’s largest supermarket chains, in deal that values it at 172.5 billion yen ($ 1.6 billion). Walmart will own the remaining stake in the company, which has more than 300 stores across the country and nearly 35,000 employees.
Japan’s crowded retail sector is notoriously competitive and several other foreign retailers have failed to find their niche, with Tesco and Carrefour having already retreated.
US-based Walmart entered Japan in 2002 when it took a stake in Seiyu and became the first overseas retailer to take over a Japanese retailer.
Walmart fully acquired Seiyu in 2008 after seven consecutive years of losses as it struggled in a deeply fragmented market. Walmart’s initial strategy to export its US strategy to the Japanese market also failed to appeal to Japanese consumers.
Talks about the U.S. retailer’s withdrawal from Japan surfaced two years ago, but people familiar with the talks say Walmart has struggled to find a buyer at the price it was looking for.
The deal with Rakuten follows a two-year partnership between Walmart and the e-commerce group aimed at breaking into the nascent but growing market for grocery delivery in Japan.
For KKR, the deal comes as the private equity fund continues to position Japan as its ‘priority’ market outside the United States, especially as the coronavirus crisis has accelerated the restructuring and divestiture of assets by Japanese companies.
Judith McKenna, head of Walmart International, said in a statement, “We have been proud investors in this company for the past 18 years and are excited about its future under the new ownership structure.”
The divestiture of Seiyu’s stake is the latest in a series of recent deals involving Walmart’s international operations. The retailer agreed last month to sell a controlling stake in Asda, the UK grocer, valuing the company at $ 6.8 billion. This month, Walmart announced plans to sell its small business in Argentina for an undisclosed amount.
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Walmart focuses on high-growth markets, particularly China and India, and its US home power, which generates about three-quarters of the group’s revenue.
Quarterly results due on Tuesday are expected to solidify Walmart’s status as the winning company under restrictions introduced to curb the spread of the coronavirus.
The group’s operations in the United States, in particular, performed well, with buyers flocking to its superstores to purchase food and other essential household items.
Analysts expect the company’s like-for-like sales to increase about 4 percent year-over-year in the third quarter. However, the retailer needs to invest heavily in e-commerce as it fights for supremacy with Amazon, and it has reduced its focus on various businesses overseas.
The companies said they expected the deal to go through in the first quarter of next year.