Wal-Mart has leg up
in bid for Daiei Inc.

Japan's bailout agency seems to be favoring
whoever has the most cash to invest

The winning bidder for the government- led rescue of Daiei Inc., Japan's third-largest retailer, may be the group that can invest most, analysts say.

The Industrial Revitalization Corp. of Japan is to conclude a second round of revival offers yesterday, Japanese media reported. Wal-Mart Stores Inc., Aeon Co. and Ito-Yokado Co. are among those submitting proposals to join the $6.9 billion agency-led plan.

A key consideration for the IRCJ will be which of the rival suitors has the most money to help Kobe-based Daiei in its third bailout attempt in as many years.

"From the IRCJ's viewpoint, it doesn't matter who the sponsor is, as long as they have the funds to give," said Tamami Matsuoka, a retail analyst at UFJ Tsubasa Securities in Tokyo.

Under the plan the IRCJ announced Dec. 28, the sponsors must be prepared to invest at least $588 million in Daiei.

The second round of bidding yesterday will help the IRCJ narrow the field, Marubeni Corp. President Nobuo Katsumata told reporters last week. His trading company is bidding for Daiei assets in a coalition that includes Ripplewood Holdings LLC.

Wal-Mart, the world's biggest retailer, has been trying to expand in Japan since it entered country in 2002 with a 6 percent stake in Seiyu Ltd., Japan's fourth-largest merchant.

Aeon and Ito-Yokado, Japan's No. 1 and No. 2 retailers, may not have Wal-Mart's financial stability to back Daiei as they struggle to bolster earnings amid nine straight months of falling retail sales, said Kiyokazu Kurauchi, a Tokyo-based retail analyst with Yasuda Asset Management Co.

"Japanese retailers are struggling with rehabilitating their own general merchandising operations," Kurauchi said.

The IRCJ wants Daiei to receive bank waivers and share writedowns and funds from sponsor companies totaling $6.9 billion to help cut its $9.8 billion debt.

One sponsor company, or a group of companies, will be chosen by the agency by the end of March, the IRCJ's managing director, Masahiro Matsuoka, told reporters last week.

Last month, some investors saw Ito-Yokado as the lead contender. That changed after the IRCJ announced it would take a one-third stake in Daiei, Yasuda's Kurauchi said.

"It was the mainstream view that the IRCJ may pick up Ito-Yokado. The view is changing now after the details of the bailout plan have been announced," Kurauchi said.

Daiei, which runs 63 supermarkets and 182 general merchandise stores, said last month it will close 53 unprofitable outlets.

Daiei aims to cut its debt to $3.8 billion by February 2010, targeting $426 million operating profit -- sales minus the cost of goods sold -- in that year, the Mainichi newspaper reported last week, without saying where it got the information.