By  on June 18, 2007

Not many in the U.S. have heard of Japanese firm Aeon Co. Ltd. — which just happens to be the largest retailer in Japan — except, perhaps, for aficionados of Talbots Inc.

With more than 4,200 stores worldwide, Aeon, based in Chiba, Japan, operates retailers primarily in Japan, but also owns 55 percent of U.S. nameplates Talbots and J. Jill Group Inc. Talbots was acquired in 1988, and J. Jill in 2006 under the Talbots corporate umbrella.

Although 38 years old as a corporate entity, and better known under its former name, Jusco, Aeon's roots date to 1758. It was in 1758 that the company's predecessor, Okadaya Co. Ltd., began trading in kimono silk fabrics. It operated a clothing store until after World War II, when it was reestablished as a department store. In 1969, Jusco, short for Japan United Stores Co., was born via an agreement between three retail operators: Okadaya, Futagi Co. Ltd. and Shiro Co. Ltd. Futagi, an apparel chain, was formed in 1937, and Shiro, a relatively small chain, was established in 1955. Jusco's role as a joint purchasing organization was to give the three partnership signatories economies of scale and buying power for its food and grocery retail operations. It has evolved into an organization with real retail muscle, with operations ranging from supermarkets to superstores and drugstores, specialty stores, shopping center development and financial and credit card services. But its initial growth was hindered for many years by land-use restrictions in Japan, which dictate, in part, how large a retail site can be.

In 1980, Jusco opened its first Mini Stop convenience store. There are now about 3,000 Mini Stops operating in Japan. Aeon operates both Jusco superstores and one of Japan's largest, if not the largest, supermarket chains. As for specialty chains in its home country, it operates Sports Authority via a joint venture, is the franchisee for The Body Shop in Japan and holds a majority stake in U.K.-based Laura Ashley stores. While its presence is felt primarily in Japan, it also has a presence in Hong Kong, Mainland China, Malaysia, Taiwan and Thailand.

Although Jusco had buying operations outside of Japan in place by the late Seventies, in 1988 it began looking overseas to the U.S. That same year, Jusco made Talbots its first U.S. acquisition, for $325 million from General Mills Inc. In 1994, the company acquired a stake in Claire's Stores Inc., and operates 205 stores in Japan through Claire's Nippon, a 50-50 venture with Claire's Stores. Claire's was itself acquired in March 2007 for $3.1 billion by buyout firm Apollo Management. The Sports Authority opened in Tokyo in 1995 through a venture established two years earlier between the athletic chain and Jusco. Sports Authority retained a 51 percent stake in the venture, but Jusco also kicked in a 10 percent investment in the chain. Sports Authority was acquired last year for $1.3 billion, including debt, by Green Equity Investors, a fund affiliated with Los Angeles-based private equity firm Leonard Green & Partners.Jusco changed its name to Aeon Co. Ltd. in 2001. Its purchase of Mycal Ltd. in 2003 makes Aeon the largest retailer in Japan.

Aeon's interests in retail have thus far been a long-term investment. It tends to hold its equity stakes for the long haul. With the liquidity in the markets via private equity and hedge funds, there have been rumblings that Aeon could easily sell its stake in Talbots.

But the so-called love affair between Aeon and Talbots seems to be fairly solid. Aeon also already owns the majority stake, so it doesn't really need to buy a bigger share to have the controlling hand. As for selling out, that seems unlikely. In 2006, Aeon, as majority owner of Talbots, bought the J. Jill Group for $517 million, in a deal in which Talbots acquired all of the outstanding shares of the women's specialty chain. Before the deal, Talbots had no debt, according to one Wall Street analyst. It now has about $400 million in debt, the analyst said, due to the financing of the J. Jill acquisition. The analyst noted that the current debt amount makes it less likely that any firm might wish to pursue a buyout of Talbots.

Under Aeon's ownership, Talbots became a public company when shares began trading on the New York Stock Exchange on Nov. 19, 1993. On Nov. 7, 2000, Talbots' common stock split

2-for-1, and it distributed additional shares to shareholders of record as

of Oct. 25, 2000.

There are three Aeon representatives on Talbots' board: Motoya Okada, Aeon's president and chief executive officer, and son of former chairman Takuya Okada; Tom Kajita, general manager of mergers and acquisitions and international operations; and Isao Tsuruta, executive vice president and general manager of Aeon (USA) Inc.

To access this article, click here to subscribe or to log in.

To Read the Full Article

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus