Walmart to sell most of Japan's Seiyu to KKR and Rakuten

Seiyu store in Minami-KusatsuPhoto: Suikotei/Wikimedia Commons/Creative Commons Attribution-Share Alike 4.0 International license
Investment firm KKR and e-commerce company Rakuten buys most of Walmart's stakes in Seiyu. Photo: Suikotei/Wikimedia Commons/Creative Commons Attribution-Share Alike 4.0 International license.
By Reidar Molthe

18 November 2020 10:15

Walmart to sell most of Japan's Seiyu to KKR and Rakuten

U.S retailer Walmart Inc has agreed to sell most of Japanese supermarket chain Seiyu to the investment firm KKR and e-commerce company Rakuten in a deal that values Seiyu at $ 1.65 billion (172.5 billion yen).

KKR will buy 65% of Seiyu and Rakuten will acquire a 20% stake while Walmart will retain 15%, the companies says in a joint statement. The move will enable to Seiyu to accelerate its digital transformation, they argue.

Walmart expects $2 billion non-cash loss from sale in Japan's Seiyu, writes Reuters. The retailer also says it does not expect a significant impact to earnings per share following the close of the sale.

The announcement confirms Nikkei's earlier report on the two companies' investment in Seiyu. The transaction is expected to be completed in the first quarter of 2021, pending regulatory approval. KKR, Rakuten and Walmart plan to jointly operate Seiyu.

KKR and Rakuten see an opportunity to grow Seiyu's business as demand for home deliveries expands amid COVID-19 restrictions.

“We will focus on working closely with Seiyu's management team and associates, and leveraging the expertise of Rakuten and Walmart to enhance the customer experience, meet their ever-changing needs and make shopping more accessible through digitalization,” says Hiro Hirano, CEO of KKR in Japan.

Advance the digital transformation

Using Rakuten's e-commerce data, the companies hope to advance the digital transformation of Seiyu's brick-and-mortar stores.

Seiyu operates more than 300 stores in Japan and employs around 35,000 staffers. Its finances suffered after the bursting of Japan's bubble economy, and it accepted investment from Walmart in 2002. The American retail giant made Seiyu a wholly owned subsidiary in 2008.

Rakuten and Walmart announced an alliance on e-commerce in Japan in 2018. Rakuten also teamed up with Seiyu to launch an online supermarket that year. It helps deliver from Seiyu stores and logistics centers to consumers' homes.

Japans largest e-commerce platform

Walmart and Rakuten have been accelerating cooperation the last couple of years and are planning to open a large-scale automated warehouse exclusively for the online supermarket next year in Yokohama, not far from Tokyo.

Rakuten runs Japan's largest e-commerce platform and has around 100 million members. It operates more than 70 businesses, including in online retail and finance, and recently became the country's newest major mobile phone carrier.

Rakuten has strength in analyzing customer data and hopes to help Seiyu adjust product selections at its stores and attract more customers. The e-commerce company has been investing in artificial intelligence and robotics technology to optimize operations, writes Nikkei Asia, a news site.

“By building on our successful partnership on Rakuten Seiyu Netsuper, and our deep experience in online retail and data-based marketing we look forward to accelerating the digital transformation of Seiyu's brick-and-mortar retail  and further merging the best of offline and online retail to offer Seiyu customers the best possible customer experience,” says Kazunori Takeda, executive vice president in Rakuten.

Tough in Japan

Walmart has tried to utilize its global purchasing power to introduce low prices in Japan through Seiyu, but competition with local discount and drugstores has been tough and it has faced consumer complaints over fresh food quality (Japan is in front world wide on fresh food).

Seiyu's sales from online shopping have grown since March this year when the seriousness of the coronavirus pandemic became clear. But it could not fully take advantage of high demand due to a shortage of stock in stores because of a surge in online shopping.

“We have been proud investors in this business over the past 18 years and we are excited about its future under the new ownership structure,” Judith McKenna, president and CEO of Walmart International argues.

“Today's announcement is important because its focus is on bringing together the right partners in the right structure to build the strongest possible local business. We look forward to supporting Seiyu's growth and success, alongside KKR and Rakuten, as a minority investor.”

Sources: Reuters, Walmart, Nikkei Asia.

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