In a statement released by Sugi Holdings, the company said the alliance with Cocokara Fine would allow them to become Japan’s top drugstore chain by pooling their resources and know-how.
The company said it made a formal proposal to Cocokara Fine last April and it plans to work towards a basic merger agreement by July 31.
While the ageing population in Japan is causing the drugstore market to expand, the aggressive openings have intensified competition, said Sugi Holdings.
The company added that new retail channels, such as e-commerce had also affected sales.
The new business will concentrate on the regions where the companies are well-established, mainly in the Kanto, Chubu and Kansai areas, explained Sugi Holdings.
Currently, Sugi Holdings operates 1,190 drugstore outlets in Kanto, Chubu and Kansai. Cocokara Fine’s network of 1,354 drugstores covers Kanto and Kansai.
“The existing drugstore networks of both companies are in highly supplementary relations in terms of areas, not facing significant mutual competition. Therefore, we believe the business integration will create high synergies.”
According to the Japan Times, the merger will result in the creation of the largest drugstore chain in Japan with estimate annual sales of Y900bn.
“We believe that the new company will be able to become the number one company in terms of quantity and quality by contributing to local healthcare ranging,” said Sugi Holdings.
Other talks to continue
In April, Cocokara Fine announced that it was in discussion with Matsumoto Kiyoshi, another large Japanese drugstore retailer, to form a capital and business alliance.
Matsumoto Kiyoshi operates stores mainly in the Tokyo metropolitan area and a tie-up with Cocokara Fine could help the company reach new areas in Japan.
Additionally, the partnership will also help Matsumoto Kiyoshi promote its private-brand products by reducing the procurement costs for cosmetics and daily necessities.
According to the company, it received the merger proposal from Sugi Holdings after it announced the start of its tie-up negotiations with Matsumotokiyoshi in April, according to Cocokara Fine.
Cocokara Fine announced that it would continue separate negotiations with Matsumoto Kiyoshi while in talks with Sugi Holdings.
According to The Japan News, Cocokara Fine’s merger with either Sugi Holdings or Matsumoto Kiyoshi will make it the largest drugstore chain, surpassing current leader, Welcia Holdings.