Aeon to Invest Up to $426 Million to Boost Stake in Rival Daiei

Aeon Co., Japan’s largest general retailer, agreed to pay as much as 40.3 billion yen ($426 million) to raise its stake in money-losing rival Daiei Inc. as part of a plan to expand in major urban areas.

Aeon said it will pay 270 yen a share in a tender offer and Marubeni Corp., Daiei’s largest stockholder, agreed to sell 48.4 million shares, according to a statement from Chiba, Japan-based Aeon yesterday. Marubeni, an energy, commodities and trading group, invested in Daiei following the retailer’s 2004 government-led bailout.

The operator of shopping malls and grocery stores, which already owns a 20 percent stake in Daiei, said it plans to boost its supermarket business in bigger cities as Japan’s retail industry consolidates amid slumping demand. Aeon has announced three deals valued at more than $391 million this year, excluding yesterday’s agreement, outpacing the $324 million total for all of last year, according to data compiled by Bloomberg.

“Aeon would like to develop its supermarket business in urban areas,” Okada, the company’s president told reporters yesterday in Tokyo.

Aeon rose 6.3 percent, the biggest gain since 2010, to 1,226 yen at the close in Tokyo trading yesterday, the highest since 2008. Daiei dropped 9.8 percent to 286 yen, paring its gain this year to 44 percent.

The proposed offer is 15 percent below Daiei’s closing price March 26, the day before Aeon announced the tender offer. Daiei, once Japan’s largest grocer, hasn’t had a profitable year since 2008, according to data compiled by Bloomberg.

Marubeni owned a 29 percent stake in Daiei prior to yesterday’s agreement and will continue to hold about 5 percent of the retailer, according to Aeon’s statement.

Daiei received a bailout in 2004 from the government-led Industrial Revitalization Corp. of Japan to recover from a collapse that followed an expansion spree in the 1970’s and 1980s that included purchases of a shopping mall in Hawaii and the Hawks baseball team in Fukuoka.