Rehabilitating Daiei - A Japanese Retailer in Trouble
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Case Details:
Case Code : BSTR161
Case Length : 15 Pages
Period : 1996 - 2005
Organization : Daiei Inc.
Pub Date : 2005
Teaching Note :Not Available
Countries : Japan
Industry : Retailing
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"In the long term, I'm not sure if the IRCJ has the
ability to revitalize Daiei. It's too big and too complicated."1
- Naoko Nemoto, Bank Analyst, Standard and Poor, in October
2004.
"The state-led rescue should allow for the swift
revitalization and rebalancing of the still debt-ridden balance sheet of Daiei.
By the spring of next year, we can start to focus on operational revitalization
of Daiei."2
- Jesper Koll, Chief Economist, Merrill Lynch Japan, in
October 2004.
Heading For Rehabilitation
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After several months of efforts, the Industrial Revitalization Corporation of
Japan (IRCJ)3, finally, in March 2005,
selected a consortium led by trading house Marubeni Corporation (Marubeni)4
to rehabilitate The Daiei Incorporated (Daiei), Japan's troubled supermarket
chain operator. Marubeni had teamed up with the investment firm Advantage
Partners Inc.5 Daiei had once been one of
Japan's largest retailers, but in course of its expansion drives during the
1980s and early 1990s, it had amassed huge debts. Despite its efforts, the
company was unable to decrease its debt burden significantly.
IRCJ then stepped in October 2004. It drew up a rehabilitation plan for Daiei,
inviting bids from various investor groups.
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Many Japanese and foreign investors exhibited an interest, but IRCJ finally
zeroed down to three groups for final consideration.
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The three
groups of investors were the ones led by Japanese supermarket chain
operator Aeon Corporation6,
trading house Marubeni, and investment fund Kiacon Corporation.7
After reviewing the rehabilitation plans submitted by these three
contenders, IRCJ chose Marubeni because it had closer ties with Daiei,
having developed products jointly with it in the past.
IRCJ decided to invest 50 billion yen8
in Daiei's shares to acquire a 33.4 percent equity stake along with a
third of voting rights. It aimed to change Daiei from a supermarket
chain selling a wide range of merchandise to the one centered on food
products. |
Rehabilitating Daiei - A Japanese Retailer in Trouble
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