Walmart to sell most of Japan’s Seiyu to Rakuten, KKR

Bloomberg

Walmart Inc is selling most of Japanese retailer Seiyu to KKR & Co and Rakuten Inc in a deal that values the supermarket chain at 172.5 billion yen ($1.6 billion), as the US giant retreats from its two-decade attempt to crack Japan’s retail market.
Under the agreement, private equity fund KKR will become the majority owner with a 65% stake, while Japanese e-commerce giant Rakuten takes 20%, the companies said in a statement. Walmart will retain a 15% minority interest. Rakuten and KKR will seek to shore up Seiyu’s digital operations as demand for online retail grows in Japan amid the pandemic. The new owners are retaining a previously announced plan to re-list Seiyu in the future.
“An IPO is certainly common goal for us,” Eiji Yatagawa, a partner at KKR, told Bloomberg News. “What’s important is to build a business that can go public. For a company to go public, you need to demonstrate a very attractive story to the market.”
In June last year, Walmart said it would seek to relist
Seiyu, following years of speculation that it was seeking to sell the chain after years of poor performance.
While a 2018 report in the Nikkei newspaper said the Bentonville, Arkansas-based retailer planned to sell the business for as much as 500 billion yen, the company had repeatedly denied it was looking to exit. The price paid by KKR and Rakuten for the stakes was not disclosed.
Walmart first invested in Seiyu in 2002 and took it private in 2008. But like other foreign retail giants, including Tesco Plc and France’s Carrefour SA, it failed to find success in Japan’s notoriously difficult and low-margin supermarket space, and struggled to compete with local rivals such as Aeon Co and Seven & i Holdings Co.
In 2018, it began working with Rakuten on fresh produce delivery in Japan as well an e-book operation in the US.
The US giant has been reshaping its international operations to focus on high-potential markets like India and China, and investing to build its digital operations globally as it faces cost pressures and sluggish growth in its home market.
Fresh produce is a 60 trillion yen market in Japan, but only around 3-4% of that is online sales, according to Noriaki Komori, a Rakuten executive officer, creating a growth opportunity. Books and home appliance see about a third of sales online, he said.