Announcing an alliance that would create Japan's biggest retail grouping, Aeon supermarket chain said yesterday it would take a 15 percent stake in troubled Daiei Inc for ?6.2 billion (US$393.5 million).
Last year, Aeon Co obtained exclusive negotiation rights for an alliance with supermarket chain Daiei Inc, which has been trying to turn around its business since collapsing in 2004.
Under the deal, Aeon is buying the Daiei shares from its biggest stakeholder Marubeni Corp, a Japanese trading company that had the largest stake in Daiei with 44.6 percent.
Aeon will also purchase a 20 percent stake in Daiei group supermarket operator Maruetsu Inc from Daiei for ?6.5 billion.
Both purchases will be completed by the end of this month, the companies said.
Combined annual sales of Aeon, Daiei and Maruetsu would exceed ¥6 trillion, surpassing another giant Japanese retailer Seven & I Holdings Co, which owns the 7-Eleven convenience store chain and Ito-Yokado Co supermarkets.
Seven & I has annual sales of about ?.5 trillion.
"By bringing together the Aeon group and Daiei group, a retail alliance surpassing 6 trillion yen in sales will be born," the companies said in a statement.
"The groups will take up challenges that exploit our edge in size, share our business assets and know-how to speed up on reforms that will boost efficiency," they said.
The alliance will not only create sheer size in the world's second-largest retail market but will also support Daiei's attempt to recover after running up huge debts as it rapidly expanded during Japan's boom of the 1980s.
After the bubble burst in the early 1990s, Daiei was left with debts of more than ? trillion.
Despite two major bailouts, Daiei failed to stay afloat and went to the state-backed corporate rehabilitation body in 2004.
Aeon, meanwhile, has grown in recent years here by setting up Western-style shopping malls and offering discounts on a range of products, including electronics, clothing and food.
The new alliance will prove yet another challenge for US chain Wal-Mart Stores Inc, the world's biggest retailer, which has been trying to expand its presence in Japan through its subsidiary Seiyu Ltd.
Wal-Mart had also reportedly been interested in a partnership with Daiei. Seiyu is losing money, although Wal-Mart says its business is going in the right direction.