Aeon Co. Mulls Merger of Drugstore Unit Welcia With Domestic Rival Tsuruha — 2nd 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 create a giant force in a fragmented market.

Japanese retailer Aeon, the parent of Welcia, said Monday that no decision has been made on the possible merger.

Tsuruha Holdings shares were recently 10% higher, Welcia Holdings shares were recently up 14% and Aeon shares rose 1.4%.

Aeon made the comments following local media reports of the potential merger over the weekend.

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 as a result of new store openings and consolidation of players in recent years.

Tsuruha has projected net profit would increase 2.5% to 25.90 billion yen ($172.1 million) for the fiscal 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 fiscal 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 25, 2024 22:18 ET (03:18 GMT)

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