The sixth- and seventh-ranked players in terms of sales will establish a committee to explore a merger, with an aim to reach a basic agreement by the end of July. Details such as the merger ratio will be ironed out by this committee.
The fifth-ranked player, Matsumotokiyoshi Holdings, also announced in April that it is discussing a capital tie-up with Cocokara, which said Saturday that it still plans to continue the talks. Now the two drug store chains will compete for Cocokara to become a dominant player in a rapidly growing market.
Sugi operates 1,190 stores, mainly in the greater Nagoya area, while Cocokara's 1,354 locations are concentrated in the greater Tokyo and Osaka areas. If a deal is reached, the merged entity would leave the competition behind by controlling markets shares of more than 30% in greater Nagoya and Osaka.
Their combined sales of 889 billion yen ($8.17 billion) will surpass the 779.1 billion yen generated in fiscal 2018 industry leader Welcia Holdings.
Sugi and Cocokara have been expanding their pharmacy and nursing care operations. The former employs roughly 2,900 pharmacists while the latter has about 2,100. By joining forces, they hope to combine their expertise in such fields as the dispensing of prescriptions, nursing care and health guidance. They also seek to differentiate themselves from rivals that are increasingly focusing on selling products other than drugs, such as everyday goods.
By pursuing talks with two suitors, Cocokara plans to choose the one best suited for the company. The company said it has no plans to discuss a three-way merger or partnership at this point.