Marunouchi buys Japanese supermarkets
Tokyo-based Marunouchi Capital, a joint venture equally owned by Japanese conglomerate Mitsubishi Corp and Mitsubishi UFJ Securities, has announced it will take over the entire share capital of Seijo Ishii Co., a high-end supermarket operator in Tokyo and a wholly owned subsidiary of Rex Holdings, the Tokyo-based food business group. Not quite a direct secondary buyout, Seijo Ishii was sold by Rex, which is owned by the Tokyo-based private equity firm Advantage Partners (AP). Although the deal size was not disclosed, local news reports indicated that it would come in at around JPY40 billion ($482.8 million). Reports also noted that the supermarket will look at business opportunities in Asia.
Seijo Ishii, which operates stores that distinguish themselves by selling imported products, has outlets in high-end residential areas, as well as shopping malls and shopping spaces inside train stations in Tokyo, Osaka, Nagoya and other urban areas. Sheijo Ishii's sales hit JPY 46 billion ($555.7 million) in 2010.
In December 2006, AP acquired a 98% stake in Rex Holdings with management support for a deal estimated to be valued at around JPY40 billion. At the time, the Japanese leveraged buyout model was still in full force, and Rex Holdings was no exception. When AP's took over Rex, the company was operating with a model of seeking inorganic growth through aggressive M&A transactions, included Gyukaku, a grilled meat chain. This particular acquisition led to an ugly court battle disputing the TOB price paid to Gukaku's shareholders, eventually ruled unfair by a judge and requiring AP and Rex to pay additional compensation to Gyukaku's sellers.
Despite the successful expansion of Rex under AP's operation, the company is now stressed with so many business units and has decided to consolidate its operations, selling off particular assets in order to sustain profits.
Marunouchi Capital has taken over Seijo Ishii in an interesting time in the company's evolution; the supermarket chain has recently re-shaped its model. Shouhei Fukusaki, Managing Director of Marunouchi Capital told AVCJ that Seijo Ishii would focus on smaller supermarket stores in busier, core areas. This approach will enable the chain to grow significantly over the coming years.
He said that the further details of their business plan with Seijo Ishii have not been confirmed because it was too soon after winning the auction against other contenders. He noted that there were several private equity firms also in the bidding process, but declined to name them. But while details have yet to be ironed out, the firm expects to enhance Seijo Ishii's originality in terms of product ranges, as well as the operation of smaller-size shops in niche locations across Japan.
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