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    7-Eleven Owner to Buy Millennium Retailing in Japan

    The acquisition will make Seven & I the largest retailer in Japan.

    LOS ANGELES -- Seven & I Holdings Co., owner of 7-Eleven convenience stores in Japan and the United States, will buy Japan department store operator Millennium Retailing Inc. in a cash-and-stock deal that would create Japan's largest retailer, the Los Angeles Times reported.

    "As we value what each one of us has, we want to create a new [retailing] model through our merger," said Toshifumi Suzuki, chairman and CEO of Seven & at a news conference.

    Tokyo-based Seven & I aims to jump-start its growth with department stores that have been benefiting from improvement in Japan's economy, though the outlook for general merchandise and convenience stores remains uncertain due to market saturation, according to the report.

    The company's move comes as foreign rivals attempt to gain further footholds in Japan's already crowded retail sector.

    Competition in the industry intensified this month when Wal-Mart Stores Inc., the world's largest retailer, took a controlling stake in Seiyu Ltd., Japan's fourth-largest supermarket chain, according to the Los Angeles Times .

    Suzuki said in the report he had high hopes for Millennium President Shigeaki Wada's skill in differentiating his company from other department stores, a talent that Suzuki said was needed to win in a saturated retail market. Wada would become Seven & I's vice president in May.

    Aside from 7-Eleven, Seven & I also owns the Ito-Yokado supermarket chain. Millennium owns Japanese retailers Sogo Co. and Seibu Department Stores Ltd.

    Their combined revenue would be about $38.8 billion for the year ended Feb. 28, making Seven & I the largest retailer in Japan, followed by Aeon Co.

    Seven-Eleven Japan became a shareholder in Dallas-based 7-Eleven Inc. in 1991 and finished buying all the shares in November.

    Seven & I said it planned to first buy a 65 percent stake in Millennium held by Nomura Principal Finance for $1.13 billion in cash by the end of March, according to the report.

    The company then would buy the remaining 35 percent directly from Millennium in a stock swap by June. Millennium is an unlisted company.

    After the announcement, Standard & Poor's Ratings Services placed its ratings on Seven & I's subsidiaries on credit watch with negative implications, citing debt at Millennium, which was formed in 2003 after Seibu combined with failed Sogo, the Los Angeles Times reported.

    "The acquisition cost and Millennium Retailing's debt burden are likely to put financial stress on the Seven & I Holdings group, causing deterioration in its capital structure, while less-profitable department stores will become a larger part of its business composition," analyst Machiko Amano said in a report.

    "As a result, Seven & I Holdings group companies may not be able to maintain the financial profile and profitability consistent with current ratings," she said in the report.

    Data on Monday indicated that Japanese department store sales rose 3.2 percent nationwide in November, a third consecutive month-on-month gain. Supermarket store sales fell 0.4 percent for a 21st straight month of decline, according to the newspaper.

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