Walmart has agreed to sell a majority stake in its Japan supermarket chain Seiyu in the latest move by the world’s biggest retailer to reshape its footprint outside the US.
Private equity group KKR will acquire 65 per cent and Japanese ecommerce company Rakuten will buy 20 per cent of Seiyu, one of Japan’s largest supermarket chains, in a deal that values it at ¥172.5bn ($1.6bn). Walmart will hold the remaining share of the business, which has more than 300 stores across the country and almost 35,000 employees.
Walmart said it expected to incur a non-cash after-tax loss of about $2bn in its fourth quarter as a result of the disposal.
Japan’s crowded retail sector is notoriously competitive and several other foreign retailers have failed to find their footing, with Tesco and Carrefour having already retreated.
US-based Walmart entered Japan in 2002 when it took a stake in Seiyu, and went on to become the first overseas retailer to take control of a Japanese retailer.
Walmart fully acquired Seiyu in 2008 following seven straight years of losses as it struggled in the deeply fragmented market. Walmart’s initial strategy to export its US strategy into the Japanese market also failed to woo Japanese consumers.
Talk of the US retailer’s retreat from Japan surfaced two years ago, but people close to the discussions say Walmart has had difficulty finding a buyer at the price it was seeking.
The agreement with Rakuten follows a two-year partnership between Walmart and the ecommerce group aimed at cracking Japan’s nascent but growing grocery delivery market.
For KKR, the deal comes as the private equity fund continues to position Japan as its “highest priority” market outside of the US, particularly as the coronavirus crisis has accelerated restructuring and disposal of assets by Japanese businesses.
Judith McKenna, head of Walmart International, said in a statement: “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.”
The disposal of the Seiyu stake is the latest in a series of recent deals involving Walmart’s international business. The retailer last month agreed to sell a majority stake in Asda, the UK grocer, valuing the business at $6.8bn. This month, Walmart said it planned to sell its smaller business in Argentina for an undisclosed sum.
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Walmart is focusing on high-growth markets, particularly China and India, and on its domestic US powerhouse, which generates about three quarters of revenues for the group.
Quarterly earnings due on Tuesday are expected to cement Walmart’s status as a corporate winner from restrictions introduced to curb the spread of coronavirus.
The group’s US business, in particular, has performed well as shoppers have flocked to its superstores for food and other household essentials.
Analysts forecast the company’s like-for-like sales rose about 4 per cent year-on-year in the third quarter. However, the retailer is having to invest heavily in ecommerce as it battles for supremacy with Amazon, and it has reduced its emphasis on various ventures overseas.
The companies said they expect the deal to complete in the first quarter of next year.