Seven & i Holdings Co. has finalized the sale of its Sogo & Seibu Co. department store chain amid a strike by employees at the flagship shop in central Tokyo on concerns the deal may jeopardize their jobs.
(Bloomberg) — Seven & i Holdings Co. has finalized the sale of its Sogo & Seibu Co. department store chain amid a strike by employees at the flagship shop in central Tokyo on concerns the deal may jeopardize their jobs.
The sale to Fortress Investment Group will close on Friday at an enterprise value of about ¥220 billion ($1.5 billion), according to a Seven & i spokesperson. That’s about ¥30 billion lower than the original price tag announced in November.
As part of the deal, Seven & i will forgive ¥91.6 billion of the approximately ¥165.9 billion it has lent to the unit, according to a statement.
The deal has sparked a rare case of industrial action in Japan, with one of Sogo & Seibu’s biggest stores shut Thursday as employees followed through on their pledge to strike should the sale go through.
About 15 union members gathered outside the store in Ikebukuro area. One man with a megaphone called out to passersby, saying the negotiations to sell Sogo & Seibu should have proceeded more carefully given the thousands of workers employed by the chain and expressing concerns the department store may become an electronics retailer.
“We sincerely apologize for the inconvenience this may cause to our customers, local residents, business partners, employees, and other stakeholders,” Seven & i said in a statement. “Sogo & Seibu management will continue to engage in discussions with the labor union regarding its business continuity and employment.”
The sale has been months in the making. Seven & i announced in November that it had secured a deal to sell the unit to Fortress for an enterprise value of about ¥250 billion. But negotiations stalled after its labor union expressed concerns about the retention of workers and said it was considering a strike, while separately the chain’s retirees sued Seven & i, saying the sale price was too low.
Another point of contention for Sogo & Seibu workers is Fortress’ plans to team up with Japanese electronics and appliances retailer Yodobashi Holdings Inc., with local media reporting the union is concerned about how existing floor space can accommodate Yodobashi.
Fortress said in a statement Thursday that it will partner with Yodobashi and plans to spend more than ¥20 billion to renovate the Ikebukuro store and other facilities. It will “do its best” to maintain the maximum employment, Akio Yamashita, head of its Japan unit, said in the statement.
The sale comes as activist investors including ValueAct Capital Management are pushing Seven & i to maximize profitability and shareholder value by focusing on its 7-Eleven stores and shedding less profitable business. That includes Sogo & Seibu which has posted four consecutive losses, according to Seven & i.
“The environment surrounding the retail industry, especially in the department store industry in Japan, has become more difficult year after year,” it said in the statement.
Seven & i, which operates about 85,000 stores globally, has said it will focus more on its core food and convenience-store operations. Chief Executive Officer Ryuichi Isaka was reelected as a director to lead the company in May, winning a showdown with ValueAct, which had sought to replace him and place its own candidates on the board.
(Updates to add Fortress comment in ninth paragraph.)
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