Japan's 'Matsukiyo' in merger talks to create drugstore giant (updated)

Sugi Holdings

14/08/2019 06:08

* Combined sales forecast exceed 1 trln yen
    * Cocokara had also considered tie-up with Sugi Holdings
    * "Matsukiyo" pioneered drugstore sales of discount
cosmetics
    *   

 (Updates with company confirmation, adds industry background)
    By Ritsuko Ando
    TOKYO, Aug 14 (Reuters) - Japanese drugstore giant
MatsumotoKiyoshi Holdings  3088.T  said it was starting talks to
merge with rival Cocokara Fine Inc  3098.T , possibly creating
the country's biggest chain of discount pharmacies with nearly
$10 billion in annual sales.
    Cocokara Fine shares briefly jumped 9% 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  7649.T , but chose
an offer from MatsumotoKiyoshi instead, it said in a statement.
    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."
    A merged company will earn over 1 trillion yen ($9.4
billion) in annual sales, topping sector leaders Welcia Holdings
 3141.T  and Tsuruha Holdings  3391.T .
    Shares in Cocokara Fine surged to their highest since
November 2018, and were up 1.3% in mid-afternoon trade, while
MatsumotoKiyoshi shares fell 2%. 
    Shares in Sugi, which said it would look for other potential
partners, rose around 2%. 

    ($1 = 106.2900 yen)

 (Reporting by Ritsuko Ando; Editing by Muralikumar Anantharaman
and Stephen Coates)
 ((Ritsuko.Ando@reuters.com; +81 3 6441 1743;))