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FamilyMart inks 212b yen Don Quijote deal in race for growth

Tokyo

FAMILYMART UNY Holdings Co, Japan's second-largest convenience-store operator, will acquire a stake in discounter Don Quijote Holdings Co in a deal that could be valued at as much as 212 billion yen (S$2.6 billion), the company announced on Thursday.

The discount chain will also spend 28.2 billion yen to take the remaining 60 per cent ownership of FamilyMart unit Uny, which operates a chain of general merchandising stores, to make it a wholly-owned subsidiary of Don Quijote.

FamilyMart will offer 6,600 yen per share for Don Quijote, a 9.1 per cent premium over Wednesday's closing price.

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Japan's saturated convenience-store market has been squeezed by tough competition between three top operators seeking new ways to grow.

The deal will keep Uny under the FamilyMart umbrella and gives the convenience-store owner a stake in Don Quijote, a retailer respected for turning double-digit growth figures and succeeding in Japan's tough retail environment. The announcement deepens a partnership between the two companies. Don Quijote took a 40 per cent stake in FamilyMart's Uny in 2017, allowing it to operate some of its stores under a joint brand name. The two companies were also cooperating on product development and distribution.

The move also brings Don Quijote closer to Itochu Corp, one of Japan's largest trading companies. Earlier this year Itochu increased its stake in FamilyMart to a controlling one.

FamilyMart's ownership of Uny stems from its 2015 purchase of Uny Holdings Co. That deal left the company with a portfolio of less profitable general merchandising stores, which Don Quijote has now taken off FamilyMart's hands to turn around.

Don Quijote rises as much as 8.1 per cent to 6,540 yen, the highest since 1998. Don Quijote shares jumped 9.4 per cent on Wednesday on reports of the deal. FamilyMart drops about 6 per cent, more than peers Lawson Inc and Seven & i Benchmark Topix index drops as much as 3.4 per cent. BLOOMBERG.