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Sat, Aug 18, 2007 - Page 10 News List

Mitsukoshi and Isetan in takeover talks

SUPER STORE The merger would help the firms compete in a market where sales have fallen 16 percent since 1997 as the population shrinks and spending habits change

Bloomberg

Mitsukoshi Ltd said it's in takeover talks with Isetan Co to form Japan's largest department store chain after sales in the industry slumped for a ninth year.

"The companies are in talks, but details such as the merger ratio or who will be president haven't been finalized," Mitsukoshi spokesman Yasuhiro Tanaka said yesterday. Mitsukoshi has a market value of ¥285 billion (US$2.5 billion), about a third less than Isetan's.

The combination would help the retailers compete in a department store market where sales have fallen 16 percent since 1997 as Japan's population shrinks and spending habits change. Mitsukoshi, after six straight years of declining revenue, would follow Matsuzakaya Holdings Co in joining with a bigger rival.

"A merger would benefit Mitsukoshi," said Shinya Torihama, an analyst with Okasan Securities Co. "Mitsukoshi is not as good at merchandise selection as Isetan so Mitsukoshi can acquire Isetan's marketing know-how."

Isetan, which brands itself as a "fashion department store" and has 20 outlets, is increasing spending by more than half to ¥26 billion this year as it refurbishes stores and expands overseas.

Nobukazu Muto, president of Isetan will become chairman, with Mitsukoshi president Kunio Ishizuka becoming president, the Nikkei Shimbun said on its English language news service.

Both companies will hold extraordinary board meetings as early as next week to approve the merger ratio, the report said, without saying where it obtained the information.

"We totally deny" the report, Isetan spokesman Koji Kawanobe said. "We are confounded by that report."

Shares in both companies were halted after a separate Nikkei report said Isetan may allocate 0.3 of its stock for each share of Mitsukoshi.

Mitsukoshi shares rose ¥4, or 0.7 percent, to ¥554 yesterday afternoon in Tokyo. Isetan shares rose ¥6, or 0.3 percent, to ¥1,789. The stocks will resume trading next week.

A merger with Isetan would be a "positive" move, Credit Suisse analyst Katsura Kihara said.

There is little overlap between the store locations of each company, Kihara said in a report last month. Kihara has a "neutral" rating on Mitsukoshi and an "outperform" rating on Isetan.

Other consolidation in Japan's department store sector in the past year includes Daimaru Inc's takeover of Matsuzakaya, which is scheduled to be completed next month.

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