By Tatsuya Moritani / Yomiuri Shimbun Staff Writer

Major Japanese consumer electronics retailer Edion Corp. believes its planned merger with industry peer Yamada Holdings Co. will help the companies survive in an increasingly competitive industry by allowing them to offer high-quality private-label products at a reasonable price, according to Chairman and CEO Masataka Kubo.

"Japan's consumer electronics market continues to shrink, and is facing aggressive entry from different sectors," Kubo said during an interview with The Yomiuri Shimbun on Monday. "Partnering with Yamada Holdings will drive economies of scale, helping us deliver high-quality private-label products at a reasonable price. We can also improve our logistics significantly."

Edion and Yamada Holdings announced last month they had reached a basic agreement on merging. Kubo said he told Noboru Yamada, the chair and CEO of Yamada Holdings, during negotiations that he had no intention of merging "unless we treat each other as equals, regardless of each company's scale."

Yamada Holdings is the industry leader, while Edion ranks fifth. Kubo noted that Yamada accepted this condition, which ultimately became the deciding factor in their reaching an agreement.

The two companies plan to continue negotiations and set up a new holding company in October 2027, with both firms to become wholly owned subsidiaries under the new company. Yamada will serve as the holding company's chair, while Kubo will serve as president. Both will serve as CEO. The two companies are expected to contribute an equal number of board members.

Kubo said it will take seven to eight years for the effects of the merger to fully materialize. "We need to thoroughly align our corporate philosophies and establish a common foundation. If we don't, we won't even be able to unify our logistics and computer systems," he said.

Edion and Yamada Holdings have many stores that are close to one another, particularly in western Japan. However, Kubo indicated that for now the store network would be kept as is. "We will need to monitor the situation for two to three years" before deciding on a store shakeup, Kubo said. He added that the companies will not interfere with each other's operations for at least two years.

The focus will now shift to major furniture retailer Nitori Holdings Co., the largest shareholder in Edion, with which it has formed a capital and business alliance. Yamada Holdings competes with Nitori, as the consumer electronics retailer is also in the housing and furniture businesses. Kubo said he would begin talks with Nitori in mid-July. "We'll have to see how far we can take these talks," he said.

If Edion and Yamada Holdings complete the merger, they would collectively run 9,954 stores in Japan, which could trigger an investigation under the Antimonopoly Law. When Yamada Denki Co. acquired Best Denki Co. in 2012, it divested some stores following an investigation by the Japan Fair Trade Commission (JFTC).

Online shopping has since become more widespread, making it difficult to determine whether a specific trade area is being monopolized. "We need to carefully negotiate with (the JFTC) to identify the trade areas where we could be violating the Antimonopoly Law," Kubo said.

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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.

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