Will Ministop be the next convenience store operator to be sold?

March 3, 2009
By Ken Worsley

Monday’s Nikkei reports that “stock market experts and industry insiders” believe that convenience store operator Ministop is “widely seen as taking center stage in the M&A drama that comes next in that sector.”

An interesting assertion, given the vagueness of those cited. Still, such a deal might make sense. Ministop is a unit of retail giant Aeon, and the Nikkei quotes an Aeon executive as saying, “There is a limit to the franchise business model.”

Of course there is. There is a limit to anything. The comment could be read as, “There is a limit to our ability to expand overseas.” The next quote from the unnamed Aeon executive is telling: “We have no intention of making the convenience store business part of our mainline operations.” Ministop accounted for about 8% Aeon’s operating profit in the six months to August 2008.

Having no intention of making convenience store operations part of core business may be a mistake, though it may be part of Aeon’s way of saying that they should sell Ministop while they can still get something for it. Or perhaps they need to unload assets.

The Nikkei goes on to tell us this:

Now that Aeon has no alternative but to draw down cash on hand and other liquid assets, and rely on loans from financial institutions, the company will naturally get around to selling off in pieces group operations, such as Ministop, observers note.

There it is. Who’s lining up to buy Ministop? Lawson has already shown its appetite for acquisitions, as it is set to buy out rival am/pm. Bringing Ministop into the fold would give Lawson nearly as many locations as Seven-Eleven currently has. On the other hand:

FamilyMart’s management has also shown strong interest, as President Junji Ueda said, “We are ready to buy Ministop anytime if the deal is found to be mutually beneficial.”

Just a week ago I posited that “smaller [convenience store operators] might find themselves able to sell out at better values as competition to acquire them increases.”

Ministop appears to be undervalued (or oversold, take your pick), which is helping make it look like a good candidate for a sale. The question is whether the holding company is making a mistake by leaving this lucrative market.

Filed Under Convenience Stores, Retail