Tokyo, Nov 27 - Japan's No.2 retailer Aeon Co Ltd said on Tuesday it will switch to a holding company structure to strengthen its management grip on a sprawling group with annual revenues of 4.82 trillion yen ($44.8 billion).
In a tough retail environment, Aeon faces further challenges as a growing number of food firms ranging from cup noodle to cheese makers have said they will raise prices and an alliance partner is defying its wishes by agreeing to integrate with a rival drugstore firm.
Under the plan announced on Tuesday, Aeon said it will split itself into a holding firm and a supermarket operator by the end of the business year to February 2009.
"The purpose of the holding company is to help operation of our group companies," said a company spokesman.
Rival Seven & I Holdings Co Ltd, Japan's largest retailer, shifted to a holding company structure in 2005, with convenience store operator Seven-Eleven Japan and superstore chain Ito-Yokado among its wide-range business portfolio.
Aeon said it will keep group companies such as Maxvalu and Aeon Mall listed after moving to the holding company structure.
Aeon, known for its flagship Jusco stores, has been aggressively acquiring a variety of retailers, and its sprawling retailing operation has superstores, groceries, department stores and specialty stores such as Talbots Inc of the United States.
But its ambition to create a massive retail group has met challenges on some fronts.
Drugstore operator CFS Corp, in which Aeon has a 15 percent stake, had agreed to a $120 million takeover by rival Ain Pharmaciez Inc, while Aeon has opposed to it, saying it would hurt shareholder value.
Meanwhile, a sharp rise in commodity prices has forced food makers and household goods suppliers to raise prices.
Aeon has said it will try as far as possible not to raise retail prices, but suppliers are also trying to boost their bargaining power by joining hands.