Daiei will close
up to 53 outlets

Daiei Inc. shares rose as much as 10 percent in Tokyo on expectations the government's $6.8 billion plan to rehabilitate the company, Japan's third- largest retailer, will succeed.

Japan's state-run bailout agency yesterday said UFJ Holdings Inc., Daiei's biggest lender, and other banks will forgive $3.9 billion of debt, and UFJ and two other creditors -- Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. -- will cancel $1.9 billion worth of Daiei preferred shares.

"Investors expect the corporate value of the company to rise under the reorganization," said Yoku Ihara, head of equity research at Retela Crea Securities Co. in Tokyo.

Daiei's equity capital will be cut by 99.6 percent, with every 10 common shares combined into one share, the Industrial Revitalization Corp. of Japan said yesterday.

Investors "didn't react negatively to the capital reduction and reverse stock split, which will dilute shareholder value," Ihara said.

IRCJ said yesterday Daiei, which now operates 63 supermarkets and 182 general merchandise stores in Japan, will close as many as 53 outlets.

The company will spend about $4.85 billion yen to renovate as many as 150 general merchandise stores over the next two years, IRCJ Managing Director Masahiro Matsuoka told reporters yesterday at a press conference in Tokyo.