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Japan's 'Matsukiyo' in merger talks to create drugstore giant

Tokyo

JAPANESE drugstore giant MatsumotoKiyoshi Holdings said it was starting talks to merge with rival Cocokara Fine Inc, possibly creating the country's biggest chain of discount pharmacies with nearly US$10 billion in annual sales.

Cocokara Fine shares briefly jumped 9 per cent on Wednesday after the company said it had decided to negotiate a potential merger with the bigger MatsumotoKiyoshi.

It had considered a tie-up with another drugstore chain, Sugi Holdings, but chose an offer from MatsumotoKiyoshi instead, it said in a statement.

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The companies said they could not comment on details of negotiations, such as possible terms and deadlines for the talks.

Known as "Matsukiyo", MatsumotoKiyoshi started as a mom-and-pop pharmacy in the 1930s and has grown rapidly through aggressive store openings and acquisitions.

It was a pioneer in drugstores' sales of discount cosmetics, allowing consumers to more casually sample products.

It and other major drugstores have also expanded into snacks, soft drinks, and liquor, dealing a blow to the country's convenience stores and supermarkets.

But drugstores, like the rest of Japan's retail industry, are now grappling with a dwindling workforce and tough price competition.

"It will not be easy to overcome business challenges on our own, and therefore it is appropriate for us to merge," Cocokara said in a statement.

"By combining with MatsumotoKiyoshi Holdings ... there is a chance of creating major synergies such as improving work efficiency and developing private brand products," Cocokara added.

A merged company will earn over one trillion yen (S$13 billion) in annual sales, topping sector leaders Welcia Holdings and Tsuruha Holdings.

Shares in Cocokara Fine surged to their highest since November 2018, and were up 1.3 per cent in mid-afternoon trade, while MatsumotoKiyoshi shares fell 2 per cent.

Shares in Sugi, which said it would look for other potential partners, rose around 2 per cent. REUTERS