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H2O Retailing, Izumiya merging to create retail giant in Kansai

H2O Retailing will gain a formidable market presence in Kansai by acquiring Izumiya, including this store in Osaka.

OSAKA -- H2O Retailing, the parent of Hankyu Hanshin Department Stores, will acquire supermarket operator Izumiya on June 1 to raise its profile in the Kansai region, covering everything from high-end apparel to low-priced daily goods.

     H2O Retailing operates 15 department stores and 70 high-end supermarkets, while Izumiya runs 119 stores, mainly supermarkets, selling food, apparel, appliances and other products. Both are based in Osaka.

     For fiscal 2013, their combined group sales projections come to 920 billion yen ($8.85 billion), ranking No. 8 in the Japanese retail industry. In the Kansai region, the duo will have an overwhelming market presence.

     "We can cover 50% of all households in Kyoto, Osaka and Kobe," the three most densely populated areas of Kansai, H2O Chairman and Chief Executive Shunichi Sugioka said at a news conference on Friday.

     H2O will make Izumiya a wholly owned subsidiary through a stock swap. One Izumiya share will be exchanged for 0.63 H2O share. Izumiya will be delisted on May 28.

     The retailers have a combined rewards card membership of some 7 million groupwide, close to the population of Osaka Prefecture, which stands at around 8.86 million. They will take advantage of the vast amount of customer data obtained through the store cards to analyze and better respond to consumer needs.

     H2O plans to reap synergies between its bread-making operations and Izumiya's food preparation facilities to cut costs, and the two firms will jointly develop new products. H2O will also consider beefing up Izumiya's struggling apparel business.

     As the Japanese retail market shrinks amid the decreasing population, and with the upcoming sales tax hike seen weighing on consumption, more retailers will likely scramble to advance regional consolidation in a bid to expand market share.



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