Wal-Mart Wants to Eat Zombie, Zombie Runs For It

[Mulboyne]

[Taro Toporific]

. If Wal-Mart, which owns a controlling 37 per cent stake in Seiyu, Japan's fourth largest supermarket operator, were to take control of Daiei it would become Japan's second biggest supermarket chain...

First I must apologize to Mulboyne and other FG for not passing the inside info on this, but DAMN, this buyout was done in 72 hours and even Mrs Taro didn't hear about it until 11pm the night before the deal broke the news.

Seiyu has cut Wal-Mart's bottom line badly... maybe 30% in international profits. Daiei would have been a better deal to start with than Seiyu. Now they got two dogs to feed. Sheesh.

[Big Booger]

If walmart gets a stake in Daiei, there will be no escape from Walmart.. Aeon might want to start thinking about selling as well... walmart comes in and destroys the competition.. Kmart in the US went bankrupt because of Walmart...

I hate those fucking super centers.. it's just a warehouse labeled as a department-grocery store.

[Mulboyne]

First I must apologize to Mulboyne and other FG for not passing the inside info on this

Figured you might have heard something about this but we wouldn't want Mrs Taro turning into Martha Stewart.
Have to agree that Seiyu would be surplus to requirements if a Daiei deal goes through. Slash and burn would definitely be the order of the day.
The experience in the UK is that big supermarkets start out cheaper for consumers but, once people get the habit and the competition goes, prices start creeping up. There are also often hidden costs to local communities in the form of tax subsidies.

[Watcher]

Can anyone explain to me why Walmart would even want to assume Daiei's debtload... or will we witness another great deal(swindle at the expense of tax payers) as was negotiated by Ripplewood for the resurection of the LTCB? Why can't Walmart with all their cash just start up their own operations like Carrefour or Costco? Buy up old Sogo or Nagasakaya(sp?) or any of the other already foreclosed properties and place that final nail in Daiei's coffin.
And what have been the effects of Walmart owning Seiyu? I saw some reports on NHK but it didn't look like much... well, ok, they did the morning cheer. Has anyone been to a "new" Seiyu?

[Taro Toporific]

Can anyone explain to me why Walmart would even want to assume Daiei's debtload... Why can't Walmart with all their cash just start up their own operations like Carrefour or Costco?

Three reasons: location, location, location
To compete in Japan, the store MUST be the train station. Carrefour or Costco are losing money cause they aren't by the station. Daiei has good locations and good buildings. Seiyu has good locations but many old buidings.

Specifically, I could give all you folks insider info on the Daiei merger because it sounded like a surplus real estate deal, not a buyout...no money to be made on a real estate deal buying Daiei stock.

And what have been the effects of Walmart owning Seiyu? ... Has anyone been to a "new" Seiyu?

There is a new Sei-Mart in Yokohama by the main driving test center. It's just like a Wal-Mart --- in the good way--- with WIDE aisles, RFID tagged items, good parking, etc.

Right now "super-centers" are big hit in boondocks. Out on my Rice Ranch in Shikoku, the Daiei supercenter is MEGA-COOL. Hell in bumfarkque Ehime Prefecture, the supercenter sells hot bagels and ---get this--- MENON Stick Deodorant.

[Watcher]

Three reasons: location, location, location
To compete in Japan, the store MUST be the train station. Carrefour or Costco are losing money cause they aren't by the station. Daiei has good locations and good buildings. Seiyu has good locations but many old buidings.

Doh! Of course...
So who will be next? Or will we be someday riding the Wal-sen? Imagine a ribbon of steel criss crossing this land from your home to office with 20 Wal-Marts in between

[Cubed]

First I must apologize to Mulboyne and other FG for not passing the inside info on this

Figured you might have heard something about this but we wouldn't want Mrs Taro turning into Martha Stewart.
Have to agree that Seiyu would be surplus to requirements if a Daiei deal goes through. Slash and burn would definitely be the order of the day.
The experience in the UK is that big supermarkets start out cheaper for consumers but, once people get the habit and the competition goes, prices start creeping up. There are also often hidden costs to local communities in the form of tax subsidies.

That they do, but then they falter and flop. Sainsburys is the case in point, and overpriced Waitrose is a loss leader for John Lewis.

[Mulboyne]

why Walmart would even want to assume Daiei's debtload?

Taro knows more but scarcity is a big issue. Ito Yokado and Aeon (formerly Jusco) aren't available to buy and Wal-Mart needs scale and location for its business model to work An interesting comparison is with the bank fight for UFJ. UFJ was regarded as a disaster and is still struggling today. So it is easy, as it stands, for the other banks to compete against it and take market share. Sumitomo (SMFG) decided to pick off bits of UFJ and win the battle in the long haul. Mitsubishi (MTFG) decided that UFJ was the last sizeable bank asset on the block and upped the stakes with a full merger proposal. SMFG realizes that it can't hope to grow as quickly organically and suddenly becomes a rival bidder although it looks like it has been shut out.
Similarly, a struggling Daiei is just a weak competitor selling off bits of it business and closing stores but the recent discussions have turned towards a full scale disposal and so Wal-Mart, like SMFG, has to move smartly. They can't afford to have Daiei fall into anyone else's hands since it could then become a stable competitor. One of the metrics Wal-Mart will be using to value Daiei is "what would it cost us to set up an operation equivalent in size to Daiei?" and not just a simple return calculation. The answer to that question is likely produce a higher bid number in the same way that SMFG's bid for UFJ was likely to have been higher than MTFG's offer.

[Taro Toporific]

Well, Mrs Taro was out drinking with the people doing this deal last Saturday night. They said that, "We always want to buy Daiei but the IRCJ got their hands in the pie and then their feet, and squatted in it."

IRCJ = Industrial Revitalization Corporation of Japan


Daiei slipping away
japantoday > commentary by Terrie Lloyd / Aug 23The latest twist on the thrashings of dying retail giant Daiei developed last week when it emerged that Wal-Mart has been in talks with the IRCJ, the government's turn-around fund, to possibly taking a position in Daiei.
If they did so, Wal-mart would create a Daiei-Seiyu empire with combined sales of 2.4 trillion yen, almost the same size as leader Aeon (on a consolidated basis), and thus would become a potent third force in the Japanese retailing industry. Shares in Daiei jumped a spectacular 27% on the news.....more....

[dimwit]

Daiei slipping away
[/b]japantoday > commentary by Terrie Lloyd / Aug 23The latest twist on the thrashings of dying retail giant Daiei developed last week when it emerged that Wal-Mart has been in talks with the IRCJ, the government's turn-around fund, to possibly taking a position in Daiei.
If they did so, Wal-mart would create a Daiei-Seiyu empire with combined sales of 2.4 trillion yen, almost the same size as leader Aeon (on a consolidated basis), and thus would become a potent third force in the Japanese retailing industry. Shares in Daiei jumped a spectacular 27% on the news.....more....

Hey, the ONLY thing I will miss about Daiei is it's "homelessware" fashion collection. I mean the only other place you could find a clothing selection like that was in eastern Europe in the 1980's. Wal-mart for all it's evil can't be any worse then that.

I disagree about shopping centres needing to be near train stations especially out here in the boonies. A lot of the department stores in downtown Shikoku cities have gone tits-up and sold there land for condos. All of the shopping centres that are being built are out in the countryside designed with ample parking.

[Taro Toporific]

[Taro Toporific]

Japan's METI Won't Intervene in Daiei, Sugiyama Says (Update1)
Aug. 23 (Bloomberg)-- Japanese government industry officials won't get involved in a dispute between Daiei Inc. and its lenders over reducing the retailer's debt, Vice Minister for Economy Trade and Industry Hideji Sugiyama said...


Also

A Dying Zombie
The news that Wal-Mart is going shopping in Japan is actually a good sign for Koizumi's reforms
By Kay Itoi And George Wehrfritz
Newsweek International
http://msnbc.msn.com/id/5784019/site/newsweek/

Aug. 30 issue - Daiei came to epitomize the industrial sclerosis that befell much of Japan Inc. in the 1990s, a condition summed up in the phrase "too big to fail." The term describes bloated companies that couldn't be allowed to die because they'd bring down their banks, trigger massive unemployment and cause heads in government to roll. Tokyo's traditional prescription for the problem: bailouts, soft loans, phony restructuring schemes—anything to keep the stores alive. That's why Japan's corporate undead came to be known, appropriately, as zombies. With debts surpassing $10 billion, Daiei, once the country's largest retailer, is Japan's Zombie King.

[Mulboyne]

Kyodo News: Daiei backs down, agrees to use IRCJ for rehabilitation
After nearly two months, the story is finally making progress again...

The development came after eleventh-hour talks between Daiei President Kunio Takagi and senior executives of Daiei's three main creditor banks -- UFJ Bank, Sumitomo Mitsui Banking Corp. and Mizuho Corporate Bank. The lenders had threatened to pull the plug on lending if the retailer did not seek IRCJ help.

But this is confusing:

Daiei had originally planned to seek support from private companies, on fears that approaching the IRCJ would mean a loss of control over the revival process. It was also concerned the IRCJ could bring in rival retailers as sponsors and eventually put Daiei under their wing.

That ought to still be a possibility unless the IRCJ has made some promises already.

[Taro Toporific]

Kyodo News: Daiei backs down, agrees to use IRCJ for rehabilitation
After nearly two months, the story is finally making progress again...

.... It was also concerned the IRCJ could bring in rival retailers as sponsors and eventually put Daiei under their wing.

That ought to still be a possibility unless the IRCJ has made some promises already.

.[/quote]

Walmart ain't buying Daiei; their M&A guys haven't been in town for months.

[Taro Toporific]

Kyodo News: Daiei backs down, agrees to use IRCJ for rehabilitation
After nearly two months, the story is finally making progress again...

.... It was also concerned the IRCJ could bring in rival retailers as sponsors and eventually put Daiei under their wing.

That ought to still be a possibility unless the IRCJ has made some promises already.

Walmart ain't buying Daiei]

I recant my comment about "Walmart ain't buying Daiei".
(PM me if anyone needs further info 'bout SeiDaiMART.)

[Mulboyne]

The FT ran a piece yesterday reviving the Wal Mart story...I'll keep my eyes out...

[Taro Toporific]

The FT ran a piece yesterday reviving the Wal Mart story...I'll keep my eyes out...

Here's a longish technical description of the Daiei Meltdown by a local guru, Darrel Whitten of http://www.japaninvestor.com.

Date: 10/16/2004 8:00:00 PM
From: Darrel Whitten of http://www.japaninvestor.com
NBR'S JAPAN FORUM (ECON)

UFJ Bank and Daiei--A Light At the End of the NPL Tunnel
In response to Mr. Lockhart's observations on the Daiei-UFJ Saga]...more...
[/i]

[Mulboyne]

Bloomberg: Daiei Buyer May Be Chosen in January
Oct. 19 (Bloomberg) -- Japan's bailout agency may select a buyer for Daiei Inc., a retailer with about 1 trillion yen ($9.1 billion) of debt, as early as January, a senior official said. The [IRCJ] plans to finish its financial review of Daiei by the end of the year, Shinjiro Takagi, chairman of a committee that oversees companies applying for support, in an interview at its headquarters in Tokyo yesterday.
Wal-Mart Stores Inc., the world's biggest retailer, Deutsche Bank AG, Ripplewood Holdings LLC, were among investors that were working on a private solution to revive Daiei, which had 1.04 trillion yen of debt in September. "If there are several bidders, we'll evaluate their strategies, the corporate value they suggest and how serious they are interested," said Takagi.
IRCJ's Committee will treat domestic and overseas bidders equally in the process of selecting a sponsor for Daiei and there's a possibility there are more potential candidates than the company suggested, said Takagi

[Captain Japan]

Zombie set to eat 27,000 in next feature...
Daiei may have 27,000 excess personnel in restructuring

Struggling retail giant Daiei Inc. may have as many as 27,000 surplus workers if it specializes in food supermarket operation under its rehabilitation, sources close to the case said Monday.

Daiei's three main creditor banks -- UFJ Bank, Sumitomo Mitsui Banking Corp. and Mizuho Corporate Bank -- have compiled a provisional estimate on personnel who would become idle in the course of the retailer's rehabilitation led by the state-backed Industrial Revitalization Corp. of Japan, the sources said.

[Mulboyne]

Aeon, Kyocera To Seek Joint Sponsorship Of Daiei
TOKYO (Nikkei)--Aeon Co. (8267) and Kyocera Corp. (6971) will apply to become joint sponsors of struggling retailer Daiei Inc. (8263)

Kyocera??

[Taro Toporific]

Aeon, Kyocera To Seek Joint Sponsorship Of Daiei
TOKYO (Nikkei)--Aeon Co. (8267) and Kyocera Corp. (6971) will apply to become joint sponsors of struggling retailer Daiei Inc. (8263)

Kyocera??

Excess cash is Kyocera's big problem. They got nowhere to invest all their piles of cash. Kyocera needs to take on debt like Daiei as a poison-pill against a hostile take-over to brab their HUGE piggybank.

[Taro Toporific]

Aeon, Kyocera To Seek Joint Sponsorship Of Daiei
TOKYO (Nikkei)--Aeon Co. (8267) and Kyocera Corp. (6971) will apply to become joint sponsors of struggling retailer Daiei Inc. (8263)

Sounds like they're trying to buy at the bottom, hee, hee.
Japan's retail sales fall 1.4% in Oct., down for 3rd month
Kyodo News Nov 29--- Japan's retail sales fell 1.4 percent in October from a year earlier to 10.47 trillion yen for the third straight monthly decline due mainly to a sharp drop in automobile sales, the Ministry of Economy, Trade and Industry said Monday...more....

[Taro Toporific]

Wal-Mart, Aeon bid for Carrefour's Japan ops-paper
TOKYO, Dec 2 (Reuters)- Three Japanese and U.S. retailers, including Wal-Mart Stores Inc. , have placed competing bids to buy Carrefour SA's Japanese outlets, all valuing the business at more than $300 million, a newspaper said on Thursday.
In addition to Wal-Mart, the world's largest retailer, Aeon Co. , which is Japan's biggest retailer, and general merchandiser Izumiya Co. Ltd. have submitted bids, the Asian Wall Street Journal reported...more...

[Taro Toporific]

French retailer Carrefour mulls quitting Japan: report
03.12.2004 - Channelnewsasia.com
....Now Carrefour is considering selling the stores as two groups according to their regional locations: three based in the Tokyo metropolitan region and five in the Osaka area in western Japan
..more...

[Captain Japan]

IRCJ plan calls for Daiei to close 53 stores-paper
Reuters

TOKYO, Dec 8 (Reuters) - A state-backed bailout body's restructuring plan for debt-laden Japanese retailer Daiei Inc calls for the closure of 53 stores and debt forgiveness of 410 billion yen ($3.99 billion) by creditor banks, a newspaper reported on Wednesday.

The daily Asahi Shimbun said a plan by the Industrial Revitalisation Corp of Japan (IRCJ) called for the closure of 53 of Daiei's 263 stores, with the likely loss of more than 2,000 jobs.

Initial plans to turn Daiei into just a food supermarket have been scrapped and the retailer will remain a general merchandise supermarket that also sells clothes and household goods, other media reports said.

It will retain its credit card operations and supermarket chain Maruetsu Inc , but other non-core holdings such as its steak restaurant Volks Inc will be sold, the business daily Nihon Keizai said.

Daiei owes nearly $10 billion to banks led by UFJ Holdings Inc. after aggressive expansions through the 1980s gave way to years of falling sales.

[Taro Toporific]

Wal-Mart may withdraw bid to sponsor Daiei-paper
TOKYO, Dec 15 (Reuters) - Wal-Mart Stores Inc. , the world's biggest retailer, may withdraw from the bidding to sponsor the rehabilitation of ailing Japanese retailer Daiei Inc. , the Nihon Keizai business daily reported on Wednesday.
The paper said Wal-Mart wanted to take management control of Daiei, but the state-backed corporate turnaround body, which has been rebuilding Daiei since October, planned to hold a third of the retailer....more...

See also:
[size=200] Department stores hear fat lady singing [size=200]
Asahi / Dec 15
... It's a big-time reality check...How's that? Now that it is all out in the open, department stores can end the theatrical posturing and face facts. Large stores of buttoned-down staff peddling everything from shoe polish to canary cages at expensive prices just don't cut it anymore. ....

===========================
I just heard last night from inside* Wal-mart that a lot of their Japanese support staff for management ---more than half--- have quit Wal-mart/Seiyu headquarters since this deal isn't going anywhere and neither is the Seiyu reorganization.
*{{Disclaimer: This is not illegal insider trading info since the staff who quit are the ones who reported it to me.

[Captain Japan]

Daiei, Misawa to get IRCJ bailout
Japan Times

The Industrial Revitalization Corp. of Japan made it official Tuesday: It will support ailing retailer Daiei Inc. and Misawa Homes Holdings Inc. in what would be the biggest and probably the last case taken on by the bailout agency.

Daiei gave up any hope of reviving on its own in October after two huge bailouts from creditor banks over the past four years failed to produce results.

Kunio Takagi, who stepped down as Daiei president in October, resigned as chairman Tuesday. The rest of the top management, including President Toshio Hasumi, will leave at the end of March, the company said.

[Mulboyne]

Yomiuri: Supermarkets lose lead in Daiei race
As the Industrial Revitalization Corporation of Japan reportedly strengthens efforts to restructure Daiei Inc., the idea that major supermarket chains would help Daiei recover may have proven misdirected as other firms have come to the forefront as candidates. The IRCJ on Monday closed the second round of applications for candidates to sponsor the struggling retailer. About seven consortiums, including those led by Ito-Yokado Co., Aeon Co. and U.S. retailer Wal-Mart Stores Inc., were said to have applied. A final decision on a sponsor is expected in late March, but speculation over a winner has intensified as consortiums continue to lose and gain members.
Marubeni Corp., a major trading house, entered a bid in the first round of applications in December with several companies, including a U.S. investment fund. But immediately before the second round, it left its group to join Advantage Partners Inc., an independent Japanese buyout fund. Marubeni reasoned that joining a domestic firm in a bid would be more advantageous after it was revealed that the IRCJ intended to obtain a 33.4 percent stake in Daiei.
...The IRCJ likely will narrow the choice to two or three candidates later this month and intends to allow consortium memberships to change, except for the lead companies in the runup. Many observers said drastic changes within consortiums could occur soon.

[Mulboyne]

CNN: Wal-Mart won't sponsor Japan retailer
TOKYO (Reuters) - Foreign bidders including Wal-Mart Stores Inc. have been dropped from the race to sponsor ailing Japanese supermarket operator Daiei Inc., sources familiar with the selection process said Friday. Japan's state turnaround body has narrowed the list of potential investors to three groups, eliminating groups led by Wal-Mart (Research), U.S. investment fund Ripplewood Holdings and grain trader Cargill Inc., as well as No. 2 Japanese retailer Ito-Yokado Co. Ltd., the sources said.
The groups' investment plans would have required significant changes to the tightly scripted restructuring scheme crafted by the Industrial Revitalization Corp. of Japan (IRCJ), which took control of Daiei's restructuring in October