Wal-Mart lost Daiei restructuring to Marubeni

Wal-Mart did not get the contract to restructure Japan's ailing and deeply indebted retail giant Daiei. The Bentonville-based multinational had made no secret about its ambitions to take over the firm, which employs 40,000 workers. Wal-Mart has a 37.5 per cent stake in another Japanese retailer, Seiyu, and is expected to take it over completely within a few years.

It will instead be Marubeni, the large Japanese trading house, which together with investment firm Advantage Partners will try to put Daiei in shape again. The contract was awarded to this consortium yesterday, by the semi-public Industrial Revitalization Committee IRCJ, which will also take part in the restructuring.

Wal-Mart lost out already at an earlier stage when three Japanese bidders were short-listed for the contract. This can be seen as a signal to world's largest retailer that it is not welcome to play too big a role in the Japanese commerce sector. Seiyu has not been very successful, and Wal-Mart has had to book considerable losses for its Japanese operations.

Marubeni was reportedly selected for the restructuring task as it already had close business ties with Daiei. It is a large shareholder in one of Daiei's supermarket chains, Maruetsu. The trading house will now become a major shareholder of Daiei, aiming at a 15 per cent ownership stake.

The consortium plans to close 53 supermarkets, while opening 100 new ones, particularly in the Tokyo region. This could mean that up to 5,000 workers lose their jobs. How many jobs would be created in the new stores has not been announced.

Daiei is Japan's third largest supermarket chain with 32,000 workers.

Its main problem is not that the stores would do badly, but it has accumulated large debts in the 1980's, which have put its continued existence in danger. The restructuring will now involve changing parts of the bank debt into Daiei shares, as well as apparently writing off parts of it.