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Japan’s Mitsubishi Corp targets majority stake in Lawson

Japanese trading house Mitsubishi Corp on Thursday said it is considering raising its stake in convenience store operator Lawson Inc to make it a subsidiary, in a deal worth about 140 billion yen ($1.37 billion).

By: | Tokyo | Published: September 15, 2016 1:44 PM
With a 33.4 percent stake as of earlier this year, Mitsubishi Corp, Japan's largest conglomerate whose businesses range from steel processing to salmon farming, already is Lawson's biggest share holder. (Reuters) With a 33.4 percent stake as of earlier this year, Mitsubishi Corp, Japan’s largest conglomerate whose businesses range from steel processing to salmon farming, already is Lawson’s biggest share holder. (Reuters)

Japanese trading house Mitsubishi Corp on Thursday said it is considering raising its stake in convenience store operator Lawson Inc to make it a subsidiary, in a deal worth about 140 billion yen ($1.37 billion).

Lawson is trying to claw back market share in the Japanese market, after a merger between FamilyMart Co and Uny Group Holdings earlier this month knocked the Tokyo-based chain down from second- to third-biggest by number of stores.

Mitsubishi was planning to raise its stake in Lawson to just over 50 percent, a source with knowledge of the talks told Reuters. In separate statements, both companies said Mitsubishi was considering a takeover, but no decision had been made.

With a 33.4 percent stake as of earlier this year, Mitsubishi Corp, Japan’s largest conglomerate whose businesses range from steel processing to salmon farming, already is Lawson’s biggest share holder.

Increasing its stake to 50 percent would cost Mitsubishi about 140 billion yen based on Lawson’s current market value of around 792 billion yen, plus a premium.

Lawson stood to gain from Mitsubishi Corp’s vast food processing and distribution businesses, the source said, as domestic convenience stores battle with larger supermarket chains to draw in a wider range of consumers, including elderly people.

“The biggest benefit of an increased presence by Mitsubishi Corp would be that they could help us strengthen our product appeal,” said the company source, declining to be named due to the sensitivity of the subject.

While Lawson stood to gain from the increased backing, one investor said that for Mitsubishi, the investment would be a drop in the bucket relative to its massive portfolio.

“It will create a more stable return profile. But within the whole Mitsubishi group, it’s very small so the impact won’t be that much,” said Richard Dingemans, CEO at Pelargos Capital, based in The Hague.

To better compete in the consolidating convenient store sector, Lawson has been setting up joint ventures with smaller regional convenient store chains to expand its presence around the country.

In an interview with Reuters in June, Lawson President Sadanobu Takemasu, who began his career at Mitsubishi Corp, said Lawson was looking for opportunities to expand overseas.

The company operates stores in China, Indonesia and other countries but has been struggling to replicate its domestic success overseas.

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