Mitsubishi Mulls Lawson Majority Stake, Retail Shift

(Bloomberg) -- Mitsubishi Corp. has proposed increasing its stake in convenience store operator Lawson Inc. and may make it a subsidiary as Japan’s biggest trading house shifts away from commodities.

The company currently has a 33.4 percent stake in Japan’s third-biggest operator of convenience stores. Lawson said in a statement it received a proposal from Mitsubishi and hasn’t yet decided how to respond. Mitsubishi may raise its stake to 51 percent, said a person with knowledge of the situation, who asked not to be identified due to company policy. A 17.6 percent stake would be valued at about 130.8 billion yen ($1.3 billion), based on the Sept. 14 closing share price for Lawson. Mitsubishi hasn’t made a decision yet on its Lawson holdings, according to a statement Thursday.

Mitsubishi, which earlier this year reported its first loss on a group basis since the company’s founding in its current form about 60 years ago, is aiming to shore up profit by moving away from resources and into areas such as consumer retail and services. Lawson said in June it was looking to buy other chains in the U.S. as it speeds up overseas expansion.

“The strengthening of trading company support in store development, as well as supply and distribution of foodstuff, is a plus for Lawson,” Makoto Sakurai, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co., wrote in a note Thursday. Lawson spokesman Li Ming declined to comment on the valuation of the shares.

Share Reaction

Lawson shares rose as much as 7 percent to 7,930 yen. Mitsubishi fell 0.3 percent to 2,091.5 yen at the 11:30 a.m. in trading break in Tokyo. The benchmark Topix index fell 1.1 percent.

Mitsubishi reported a net loss of 149.4 billion yen in the 12 months ended March 31 in May. The shift away from commodities is going to take at least three years, Chief Financial Officer Kazuyuki Masu said in an interview last month.

Lawson, which operates about 12,600 stores in Japan and about 930 outside the country, is targeting an increase to 1,000 overseas shops by February 2017.

The Nikkei reported earlier that Mitsubishi was considering raising its stake in the convenience store operator to 51 percent and that it would pay a premium in a tender offer to existing shareholders, plus possible private placement of new stock.

--With assistance from Grace Huang To contact the reporters on this story: Stephen Stapczynski in Tokyo at sstapczynsk1@bloomberg.net, Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net. To contact the editors responsible for this story: Iain Wilson at iwilson2@bloomberg.net, Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Aaron Clark, Dave McCombs