Aeon Co. Weighs Merger of Drugstore Unit Welcia With Rival Tsuruha — 3rd Update
By Kosaku Narioka
Aeon Co. said it is considering a merger of its Japanese drugstore unit Welcia Holdings with domestic rival Tsuruha Holdings, a move that would combine two of Japan's biggest pharmacy chains in a fragmented market.
Shares of Tsuruha Holdings and Welcia Holdings surged 11% and 17%, respectively, on Monday, while Aeon shares gained 2.5%.
Aeon, Welcia and Tsuruha said Monday that they are considering the potential business integration, but a decision has yet to be made. Local media reported the possible merger over the weekend.
If combined, Welcia and Tsuruha's annual revenue would top 2 trillion yen ($13.29 billion) and be more than twice that of the third biggest drugstore operator, MatsukiyoCocokara.
Sales at domestic drugstores have grown in recent quarters, thanks to a recovery in the number of shoppers, including foreign tourists, while pandemic-related demand has subsided.
Yet, competition has been fierce due to new store openings and consolidation of players in recent years.
Tsuruha has projected net profit would increase 2.5% to Y25.90 billion ($172.1 million) for the year ending May 15, with revenue forecast to grow 6.5% to Y1.033 trillion.
Welcia expects net profit to rise 3.6% to Y28.00 billion and revenue to climb 7.5% to Y1.230 trillion for the year ending Feb. 29.
Aeon in January said it was in talks with Hong Kong-based asset manager Oasis Management to acquire shares of Tsuruha as part of efforts to strengthen its existing tie-up with the Japanese drugstore operator.
Aeon held a 14% stake in Tsuruha as of mid-November. Oasis had a 13% stake in the drugstore operator as of May 2023.
Write to Kosaku Narioka at kosaku.narioka@wsj.com
(END) Dow Jones Newswires
February 26, 2024 02:47 ET (07:47 GMT)
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