KKR agrees $1.6b carve-out of Walmart's Japan business

The objective is to reposition the company, which has more than 300 stores nationwide, as an omnichannel retailer with a stronger online presence. KKR will take a 65% stake in Seiyu, while domestic e-commerce giant Rakuten will have 20% and Walmart will retain 15%.

Rakuten already has an alliance with Walmart, which includes an online grocery delivery service for Seiyu in Japan and Walmart acting as a distribution partner for Kobo, Rakuten’s e-book business.

Last year, Seiyu made an aggressive push into digitization and this will continue with KKR and Rakuten’s support. Planned initiatives include increased investment in app-based shopping, payment and delivery services, new options for cashless payment, providing a more seamless online-to-offline customer experience, and broadening the mass-market product offering.

Seiyu CEO Lionel Desclee will stay with the company through a transition period before moving to a different role at Walmart.

Rakuten is in the process of establishing a business unit dedicated to helping brick-and-mortar retailers in Japan embrace digitization by merging online and offline channels and offering a more personalized shopping experience. The unit – known as Rakuten DX Solution – will launch in January.

“We will focus on working closely with Seiyu’s management team and associates and leveraging the experience of Rakuten and Walmart to enhance the customer experience, meet their ever-changing needs, and make shopping more accessible through digitalization,” said Hiro Hirano, co-head of Asia Pacific private equity and CEO of Japan at KKR, in a statement.

Established in 1963 by Seibu Department Stores, Seiyu operates through supermarket and hypermarket formats, as well as through Rakuten Seiyu Netsuper, the delivery service joint venture with Rakuten. It has a workforce of 34,600 and reaches seven million customers. The company previously launched MUJI as an own-label brand, spinning it out in 1990.

Walmart took a minority stake in Seiyu in 2002 and moved to majority ownership three years later. The company was delisted in 2008 and became a wholly-owned subsidiary of Walmart. Last year, Walmart said it had a long-term plan to take Seiyu public again.

As of January, there were 333 Seiyu outlets in Japan, down from 431 in 2015, according to Walmart's latest annual report. Of these, 54 were directly owned. Japan represented Walmart’s sixth-largest international market by store square footage.

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• Topics
• North Asia
• Consumer
• Buyouts
• Japan
• KKR