JAPAN – American multinational retail corporation has announced plans to sell a majority stake in Japanese supermarket chain Seiyu to investment firm KKR and e-commerce giant Rakuten.
The deal which values Seiyu at US$1.65 billion including debt, comes after a long period of speculation about Walmart looking to exit Japan after suffering years of poor profitability amid stiff competition from rivals.
According to a report by TechCrunch, KKR will buy a 65% stake in Seiyu, while Rakuten, Japan’s largest e-commerce company, will take a 20% stake through a newly created subsidiary called Rakuten DX.
Walmart which first entered the Japanese market in 2002 by acquiring a minority stake in Seiyu before fully acquiring the business in 2008 will maintain a minority 15% stake in the business once the deal is fully implemented.
The Seiyu deal is the latest divesture of underperforming assets by Walmart, following its exits in Britain and Argentina where it had struggled to compete with local rivals.
India is however, proving to be less hostile to Walmart, and the opportunities there have encouraged the US retail giant to expand its footprint through a US$16 billion purchase of e-commerce provider Flipkart.
Deal street Asia reported that the Walmart exit comes at a time when the business had started showing signs of improvement.
The company reported a net profit of US$450,000 in 2019, after reporting losses in the previous years.
The company noted that the improvement was partly because of an increased interest in online grocery shopping in the country.
Rakuten which comes on board with a 20% stake is already familiar with Seiyu’s business having formed a strategic alliance with Walmart in 2018 that included launching an online grocery delivery service in Japan.
Called Rakuten Seiyu Netsuper, the online delivery service includes a dedicated fulfilment center, in addition to inventory picked up from Seiyu’s supermarkets.
After the deal, Seiyu will be part of Rakuten DX, which is intended to bring more brick-and-mortar stores online through Rakuten’s e-commerce and cashless payment channels.
According to a July 4 report from the Japan Times, internet sales accounted for about 5% of total grocery sales, compared to 2.5% before the pandemic.
This deal would thus be opportune for Seiyu given the recent shift to online buying by Japanese consumers as a result of COVID-19.
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