Lawson in Talks to Buy at Least Three China Store Chains

Lawson Inc. (2651), Japan’s second-largest convenience-store chain, is in talks to buy at least three operators in China in its first overseas acquisition as the company looks to faster growing markets to increase sales.

“There will be a huge opportunity to acquire businesses in China,” Chief Executive Officer Takeshi Niinami said in an interview in Tokyo April 3, declining to name any targets. “We are negotiating with more than three or four parties.”

Niinami is in discussions with an operator of an 800-store chain and another with 150 in China, to help meet his target of opening 10,000 outlets in the country by 2020. Rival chains are also expanding outside Japan in Asia, where relatively young populations are boosting demand for neighborhood stores, as demand eases in their home market with a falling population.

“The growth potential for convenience stores is far bigger in China than in Japan,” said Naoki Fujiwara, who helps oversee $6 billion at Shinkin Asset Management Co. in Tokyo. “Lawson seems more aggressive than 7-Eleven as far as expanding in China and I think it’s possible for them to achieve their target of 10,000 stores.”

Lawson had about 355 outlets in China’s Shanghai, Chongqing and Dalian cities as of February, according to Shin Ichikawa, a Lawson spokesman. Seven & I Holdings Co.’s 7-Eleven chain, Lawson’s bigger Japanese rival, has about 1,792 stores in China and more than 7,000 in the U.S., according to its website.

Photographer: Nelson Ching/Bloomberg

Takeshi Niinami, president of Lawson Inc. Close

Takeshi Niinami, president of Lawson Inc.

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Photographer: Nelson Ching/Bloomberg

Takeshi Niinami, president of Lawson Inc.

Lawson has set aside about $300 million for overseas acquisitions, Niinami said. The Tokyo-based company had 73.5 billion yen ($894 million) in cash and and near-cash items as of Nov. 30, 3.7 percent less than a year earlier, according to data compiled by Bloomberg.

‘Want to Sell’

“There are a lot of domestic players with stores, but they don’t have the supply chain,” Niinami said, referring to China. “They don’t know what to do. But they want to sell eventually.”

FamilyMart Co. (8028), the third-biggest convenience-store chain in Japan, has most of its outlets overseas. Chiba, Japan-based Ministop Co. (9946) said last month it will enter Kazakhstan as its fifth overseas market.

Lawson is scheduled to report earnings on April 12.

Net income probably fell about 7 percent to 23.5 billion yen in the 12 months ended Feb. 29 from 25.4 billion yen a year earlier, according to the company’s own forecast. Sales rose about 7 percent to 473 billion yen, based on the estimate.

Lawson declined 1.7 percent to 5,080 yen at the close in Tokyo trading yesterday, paring its gain this year to 5.7 percent. The stock advanced 20 percent in 2011.

Japan’s population, on the decline since 2006, is poised to reach 125.7 million next year, according to data compiled by Bloomberg. The nation’s population stood at 126.5 million in 2011.

To contact the reporter on this story: Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Teo Chian Wei at cwteo@bloomberg.net

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