Acquisition of Daiei, Inc. Deferred Shares with Voting Rights from Industrial Revitalization Corporation of Japan

Jul. 28. 2006
Marubeni Corporation

Marubeni Corporation (“Marubeni”) has agreed with Industrial Revitalization Corporation of Japan (“IRCJ”) and Advantage Partners, LLP (“AP”) that Marubeni will acquire all 66,489,000 deferred shares with voting rights (voting rights ratio: 33.67%) of the Daiei, Inc. (“Daiei”) held by the IRCJ, and that Marubeni and IRCJ have decided a transfer price of 69.8 billion yen. The transfer procedure from IRCJ will proceed promptly based on the agreement. Following the transfer, Marubeni will hold 44.6% the voting rights for Daiei and become Daiei’s largest shareholder.

Since being selected as Daiei’s business sponsor in March 2005, Marubeni has promoted Daiei’s business revitalization plan of in cooperation with IRCJ and AP with the aim of establishing a “new Daiei.”

We can confirm that Daiei is on a firm path towards revitalization due to the following:

  • Measures to strengthen business capabilities, such as the refurbishment of stores, tie-ups with leading companies, the start-up of a new private plan, and a declaration for freshness have been steadily implemented, with the results becoming evident from the second half of fiscal 2005.
  • Initiatives such as financial restructuring, the suspension of non-core businesses, the closure of unprofitable stores, and personnel measures, have been implemented under the program of the IRCJ, and structural reform was nearly completed in fiscal 2005 as per the initial business revitalization plan.
  • The domestic consumer market is showing signs of recovery, and the environment surrounding Daiei has begun to exhibit change, such as the enhancement of the value of existing Daiei stores as commercial facilities reflecting the enforcement of the “three community renovation laws.”

Therefore, we have determined that the business base of Daiei can be strengthened with Marubeni taking the lead in management and by promoting the rapid enhancement of business capabilities and the improvement of financial standing. Following the consultation of the three companies that are Daiei’s business sponsors, we reached an agreement to for Marubeni to purchase all of Daiei’s shares held by the IRCJ.

Radical reform has progressed at Daiei through the basic business policies of strengthening the food business, withdrawing from certain categories, and inviting influential tenants.
Daiei is aiming to become the “new Daiei” characterized by the following:

  • SM stores that are actively oriented to the local community and stores that customers visit every day
  • GMS stores that are the new type of compound commercial facilities, which have space for selling food, clothing, and daily necessities that is managed directly or by specialty shop subsidiaries, integrating many superior tenants

Daiei’s transformation is being brought about steadily. As general trading company, Marubeni will be able to fulfill all functions, including actively promoting the refurbishment of stores, inviting influential tenants, redeveloping the information and logistics systems, and rapidly dealing with the further enhancement of the corporate value and stock value of the new Daiei.

Amid the change of the food market into a consumer-led market accompanying the full development of the Japanese economic and social structure, Marubeni has targeted food distribution as an area to be strengthened. We have learned how to meet the needs of consumers through previous retail and distribution activity, and have made efforts to establish value chains to develop and procure commodities through global networks by linking the needs of consumer to the upstream and middle stream.
A total of 500 million customers visit Daiei annually, and the company is a large retailer with annual sales of about one trillion yen, centering on foods and clothing. We believe that Marubeni can establish stronger value chains not only in the area of food, but also for other commodities by strengthening the business tie-up relationships with Daiei.

Deferred shares differ from common shares. Deferred shares have no dividend rights and are subordinated to common shares with regard to the rights to claim the distribution of remaining assets. Deferred shares are not stock exchange listed and have no liquidity. The acquisition price of the shares from the IRCJ was determined as a result of consultation and negotiation with the IRCJ after taking the difference in the type of shares and the lack of liquidity into account.
Daiei has a policy of maintaining its stock exchange listing as it has in the past after Marubeni becomes the largest shareholder.

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