Global investment firm KKR & Co. Inc. will buy a majority stake and a new Rakuten subsidiary will buy a minority stake in Japanese retailer Seiyu GK from Walmart Inc. in a deal valuing the business at ¥172.5 billion (about $1.6 billion).
Under the deal, KKR will acquire a 65% stake in Seiyu, and Rakuten’s newly created subsidiary focusing on retailer digital transformation, Rakuten DX Solution, will acquire a 20% stake, while Walmart will retain a 15% stake. The new ownership structure will allow Seiyu to leverage the combined retail expertise and innovation of KKR, Rakuten and Walmart as a stand-alone company and ramp up its digital transformation.
Last year, Seiyu launched an ambitious strategy to accelerate growth through by doubling down on providing value, fresh produce and digital convenience to customers. The company has already met or surpassed operational and financial goals in such key areas as market share, customer satisfaction, associate engagement and financial performance. Together, KKR, Rakuten and Walmart aim to bring complementary strengths to build on Seiyu’s momentum and boost its efforts to become Japan’s leading omnichannel retailer.
“Seiyu was a publicly held company that Walmart initially acquired a small stake in many years ago and built up its position over time,” noted Mike Troy, editorial director of Retail Leader and Progressive Grocer. “Japan was the second-largest economy at the time, but then realization of slow growth set in, so now it appears that [Walmart] is coming full circle and selling their majority position and going back closer to their initial level.”
KKR and Rakuten’s investment in Seiyu also intends to deliver a variety of substantial benefits over time for Seiyu’s customer base, among them:
- Accelerated investment in digital channels to facilitate app-based shopping, payment and delivery services;
- The introduction of new options for cashless payment;
- Enhanced service experience across both online and offline channels; and
- An improved product offering at everyday low prices to anticipate its customers’ shopping needs.
New York-based KKR will bring its deep knowledge of the Japanese market to Seiyu, as well as its long history of investing in the subsidiaries of large corporations and enabling them to unlock their potential as successful, independent companies. The investment company will also make available its network of advisors, portfolio companies and specialists to create value. KKR is making its investment from the company’s Asia private-equity fund.
Rakuten and Walmart have already formed several partnerships, including the Rakuten Seiyu Netsuper online grocery delivery service and Rakuten Group’s collaboration with Walmart that includes ebook service support in the United States. Rakuten will additionally accelerate digital transformation of Seiyu and other Japanese retailers via Rakuten DX Solution, leveraging its 100 million-plus membership base and technology.
Seiyu will continue to make use of Walmart’s global retail best practices, sourcing network and scale to maintain the price leadership and value it offers customers. CEO Lionel Desclee will lead Seiyu through a transition period, after which he will take a new position within Bentonville, Arkansas-based Walmart. A new board of directors featuring representatives from KKR, Rakuten and Walmart will focus on local decision-making, with plans to name a new CEO when the deal closes.
“This past year has been one of the most extraordinary in Seiyu’s rich 57-year history,” noted Judith McKenna, president and CEO of Walmart International. “Our associates have been exceptional, adapting brilliantly to serve customers at a time when they needed it most and outperforming against an ambitious transformation plan. We have been proud investors in this business over the past 18 years, and we are excited about its future under the new ownership structure. [The] announcement is important because its focus is on bringing together the right partners in the right structure to build the strongest possible local business. We look forward to supporting Seiyu’s growth and success, alongside KKR and Rakuten, as a minority investor.”
“By building on our successful partnership on Rakuten Seiyu Netsuper and our deep experience in online retail and data-based marketing, we look forward to accelerating digital transformation of Seiyu brick-and-mortar retail and further merging the best of offline and online retail to offer Seiyu customers the best possible OMO customer experience,” said Kazunori Takeda, group EVP and president of commerce company at Rakuten. “The planned establishment of Rakuten DX Solution will also allow us to offer digital solutions optimized to transform retail at Seiyu and in new future partnerships with retailers across Japan.”
Subject to regulatory approvals, the deal expected to close in the first quarter of 2021.
Established in 1963, Tokyo-based Seiyu is a nationwide supermarket chain in Japan with more than 300 retail units in the supermarket and hypermarket formats, and it also operates the Rakuten Seiyu Netsuper delivery service.
Founded in Tokyo in 1997 as an online marketplace, Rakuten has expanded to offer services in e-commerce, fintech, digital content and communications to about 1.4 billion members globally. The Rakuten Group has over 20,000 employees, and operations in 30 countries and regions.