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Aeon May Form REIT to Raise Funds Amid Expansion, Acquisitions

Aeon Co., Japan’s biggest supermarket chain, may sell assets into a real estate investment trust to raise funds amid expansion overseas and acquisitions.

The retailer said it’s considering setting up the REIT though “nothing has been formally decided,” in a statement today to the Tokyo Stock Exchange.

The Japanese mall operator’s debt increased as it made acquisitions to grow amid a recovery in demand following the March 2011 natural disasters. Last year it agreed to pay 45 billion yen for regional grocers Marunaka Co. and Sanyo Marunaka KK, to expand in the western part of the country.

Aeon had debt of 1.4 trillion yen ($17.4 billion) for the fiscal year through February 2012, according to data compiled by Bloomberg.

Aeon’s property trust may raise as much as 200 billion yen in an initial public offering this year, the Nikkei newspaper reported earlier today, without citing anyone. The trust will also borrow to fund as much as 300 billion yen in purchases of 20 or more properties from the mall operator, the report said. Aeon will use proceeds from the IPO, the biggest by a Japanese REIT, to build more shopping centers, Nikkei said.

The offering would be biggest in Japan’s equity market this year, surpassing the 151 billion yen raised by Mazda Motor Corp. in March. Companies have raised 479 billion yen in 45 transactions in the market so far in 2012, compared with 108 totaling 1.47 trillion yen in 2011, data compiled by Bloomberg show.

The retailer this month agreed to buy 50 percent of Tesco Plc’s Japan operation for a “nominal sum.” Aeon’s net income rose 12 percent to 66.8 billion yen in the 121 months ended Feb. 29, the company reported in April.

Aeon has said it aims to drive growth by expanding in large cities in Japan as well as entering retail markets in Vietnam and Cambodia.

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