7-Eleven buys Millennium to form giant

Seven I Holdings Co, owner of 7-Eleven convenience stores, said yesterday it will pay ¥131.1 billion (US$1.13 billion) to buy the Japanese department store operator Millennium Retailing Inc in a deal creating the world's No. 5 retailer.

The deal comes as Tokyo-based Seven & I tries to tap into a renewed surge in Japanese consumer spending as the world's second-largest economy stages a strong comeback after a decade in the doldrums.

The news also helped send Japan's benchmark stock index topped 16,000 points Monday, reaching its highest level since October 2000.

The Nikkei 225 index rose 166.30 points, or 1.04 percent, to finish the day's trading at 16,107.67 points on the Tokyo Stock Exchange. The broader Topix index, including all shares on the exchange's first section, gained 11.05 points, or 0.67 percent, to 1,648.94.

Shares Seven & I Holdings surged by 11.34 percent to ¥4,910 (US$42.33) and Millennium Retailing stock climbed 0.48 percent to ¥2.08 million.

Seven I will complete the transaction in two steps, first buying a 65 percent stake in Millennium from Nomura Principal Finance for ¥131.1 billion in cash by the end of March, Seven & I said in a statement. It will buy the remaining 35 percent directly in a stock swap by June. Millennium is an unlisted company.

With a combined revenue of around ¥4.5 trillion for the year ended Feb. 28, the two companies will together emerge as Japan's No. 1 retailer, surpassing rival Aeon Co.

On a global scale, the new Seven & I would rank No. 5, according to the Nihon Keizai business daily.

Aside US-based 7-Eleven Inc and Seven-Eleven Japan, Seven & I also holds Ito-Yokado supermarkets and the Denny's Japan family restaurant chain. Millennium owns Japanese retailers Sogo Co and Seibu Department Stores Ltd.

The deal brings together more than 10,000 Seven-Eleven stores, 12 Sogo department stores and 18 Seibu stores.

The merger could help Seven & I by broadening its range of revenue and increasing its offerings of luxury goods, at a time when consumer spending is on the rise amid an economic recovery.

Personal accounts for about half of Japan's economy and helped lift department store sales 3.2 percent to ¥692.4 billion during last month, the Japan Department Stores Association said yesterday.

Merrill Lynch analyst Hidehiko Aoki said the merger should be a "positive" development over the midterm because it should allow the company to cut costs and give it more customers. One uncertainty remains: how fast they can integrate operations.

Seven-Eleven Japan became a shareholder in US-based 7-Eleven Inc. in 1991 and finished buying all the shares in November. The move has made 7-Eleven considerably more competitive by boosting investment capability in merchandising, store renovations and distribution.

Millennium established in 2003 as an umbrella group for Seibu and Sogo, which went through a court-led rehabilitation in 2000 after a failed expansion strategy had caused the company's debts to snowball.

Nomura ¥50 billion for its 65 percent stake in two investments, from last year and January of this year, Nomura said in a separate statement.