An ultra-competitive and
saturated market has prompted two of Japan’s biggest convenience store chains,
FamilyMart and Circle K, to initiate a merger they hope will rival market
leader Seven-Eleven.
The two umbrella companies, UNY
Group Holdings Co Ltd and FamilyMart Co Ltd, said in a joint statement they are
exploring ways in which to make substantial savings and pool resources in order
to increase growth in the domestic market.
Current top ranked chain
Seven-Eleven will still be out-and-out market leader, even after the proposed
tie-up, with revenue of 3.8 trillion yen compared to the possible 2.8 trillion
yen that the new merged entity will produce.
The statement said
preliminary talks had taken place but did not go into any detail regarding
specifics of the agreement or whether anything had been finalised.
The markets reacted with a 2
percent drop in FamilyMart shares. The smaller of the two companies, UNY, saw a
9 percent jump in its share price.
A regional newspaper reported
that the potential merger would be mediated by CITC Tokyo International,
a prominent Japanese trading house and a minority stakeholder in FamilyMart.
The deal is seen by many analysts to be most beneficial to
UNY. Hiromitsu Kamata, chief of the domestic assets department at Amundi Japan
said, “UNY has been having a torrid time in the last few years and the merger
could be a catalyst to halt dropping sales revenue and profits in its stores
and boost growth”.
Conversely, the tie-up could have a negative effect on
FamilyMart as it could be pulled down into UNY’s sales issues. A source close
to the matter, who preferred to remain anonymous, said that UNY forecasts its
operating profits will drop 14 percent for its annualized figures ending last
month. That’s a fourth consecutive year of dropping figures.
The supermarket and convenience sector has been highly
competitive in the last decade and most of the leading lights in the industry
have looked to streamline their operations, especially with regards to
distribution and purchasing.
Second largest Japanese convenience chain Lawson have also
been making waves, and recent rumours have it they are planning a move for
upmarket chain Seijo Ishii Co. although the takeover has yet to be completed.
