Itochu Making $5.6 Billion Bid for Japan’s FamilyMart Chain

Itochu Corp. is planning to take full control of convenience-store chain FamilyMart Co. through a tender offer, the retailer said on Wednesday.

The offer will be valued at 500 billion yen to 600 billion yen ($4.6 billion to $5.6 billion), the Nikkei newspaper reported without citing how it obtained the information. Itochu currently owns 50.1% of FamilyMart.

At that price, Itochu’s offer implies a premium of about 10% to 30% to Familymart’s current closing price. Familymart’s stock is down about a third this year. Japan’s trading companies have been increasing their stakes in the country’s biggest convenience store operators as a way to diversify business away from the volatile commodities business. In 2016, Mitsubishi Corp. paid 144 billion yen to purchase a controlling stake in Lawson Inc.

If the tender offer for FamilyMart is successful, it would become a wholly owned subsidiary of Itochu, one of Japan’s largest trading companies, according to Nikkei.

Representatives for Itochu could not be immediately reached for comment.

FamilyMart is scheduled to announce quarterly earnings at 5 p.m. Wednesday in Japan. The company is Japan’s second-largest convenience store franchiser, with more than 15,000 locations.

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One of Japan’s Largest Employers Plans to Cut Office Space by 50%

While much of Japan continues to debate the pros and cons of remote working, one of the country’s largest employers has made up its mind — and it could be a bad sign for the office sector.

Fujitsu Ltd. said it will cut its office space in Japan by 50% over the next three years, encouraging 80,000 office workers to primarily work from home in what it termed a “Work Life Shift for the new normal.”

“We will change the conventional concept of workers commuting to a fixed office and, through high autonomy and mutual trust between employees, deliver value to clients,” Fujitsu said in a statement.

The plan calls for a 5,000 yen ($46) a month stipend for workers to set up their home office environment in lieu of an existing commuting allowance and turning all existing offices to “hot-desking,” an approach many offices are currently discouraging to prevent the spread of the coronavirus.

Fujitsu is Japan’s 17th largest publicly traded employer, according to Bloomberg data, with almost 130,000 workers in total. Factory employees won’t be impacted by the move.

Fujitsu also recently made headlines as the maker of the world fastest supercomputer, named Fugaku, which is being used to help identify potential Covid-19 treatments and predict the flow of virus-laden droplets. Citigroup analyst Kota Ezawa raised his price target for the stock by 28% on Friday, saying the company will likely avoid a “severe deterioration” in its upcoming earnings.

While some of Fujitsu’s initiative could be driven by marketing concerns — the company sells technology that supports remote working — it doesn’t augur well for Japan’s office sector in a post-Covid-19 world.

Tokyo Offices Seen Facing Record Vacancies on Shift to Telework

Many traditionally-minded companies have called for employees to return to their offices, but face resistance among their staff. A survey conducted in May by the Japan Productivity Center found that more than 60% of those questioned wanted to continue working remotely even after the pandemic is contained. A Cabinet Office poll showed increased levels of interest from 25% of city dwellers in moving to the country.

Fujitsu is the second major company in recent days to bow to that sentiment. Snack maker Calbee Inc. introduced a system for its 800 office workers to work from home full-time, with no obligation to travel to the office. It expects about 30% of its staff to go to the office.

Tokyo’s office vacancies have begun to tick up over the past months, rising to 1.64% in May according to Miki Shoji Co. data. Vacancies have risen for three straight months for the first time since 2012. Data for June is set to be released on Thursday.

A falling job-to-applicant ratio also “flashes a warning signal” for Tokyo office leasing demand, Bloomberg Intelligence analyst Patrick Wong wrote in a July 3 report.

Office Vacancies in Tokyo Still Low Despite Uptick

— With assistance by Lily Nonomiya

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Asia’s Factories May Be Over Worst as China Demand Picks Up

Asia’s factory managers saw glimmers of hope in June, with the region’s purchasing managers indexes turning up across the board as demand from China picked up.

PMIs for Japan, South Korea, and Taiwan — the region’s manufacturing powerhouses — improved slightly, but stayed below 50, the dividing line between contraction and expansion. Factory output in Vietnam and Malaysia grew for the first time since January and December, before the virus spread in the region. Indonesia’s index surged almost 11 points, the biggest increase since at least 2011, while remaining below 50.

China’s Caixin manufacturing PMI, an index more focused on smaller export-oriented firms, rose in June to 51.2 from 50.7, a release Wednesday showed.

The signs of a turnaround follow another report from China earlier this week that showed an official gauge for China’s factory activity rose in June to 50.9 from 50.6 a month earlier. The non-manufacturing measure increased to 54.4.

Financial markets rallied in the second quarter, buoyed by optimism that re-openings globally would damp soaring unemployment and reinvigorate consumption. However, setbacks in controlling virus outbreaks in many countries, including the U.S., have curbed sentiment. Bloomberg Economics now expects a 4.7% contraction in the global economy this year, down from a previous estimate of a 4% contraction.

What Bloomberg’s Economists Say

“Asia’s June manufacturing purchasing managers’ indexes indicated most economies are recovering, though at varying speeds. China’s official PMI showed that the recovery accelerated, supported by external demand. Some economies such as Australia experienced an initial strong rebound as lockdowns were relaxed. Some others — notably Japan — remained deep in contraction.”

Chang Shu, Chief Asia Economist

Analysis by Oxford Economics found that regional exports are headed for their worst outcome in years, even as the easing of lockdowns paves the way for a gradual recovery.

“The easing in global restrictions and improving Chinese demand are encouraging, but we expect regional exports to remain under pressure in the short-term, given the ongoing global recession,” Sian Fenner, an economist at Oxford Economics, wrote in a note before the PMI data.

In South Korea, a bellwether for global trade, exports continued to contract in June, but at a slower pace than in previous months. Shipments fell 10.9% from a year ago, an improvement from the 23.6% slump in May.

“Given the cyclical nature of South Korea’s export-oriented economy, it appears the chances of a slow recovery from the Covid-19 economic shock are rising,” said Joe Hayes, an economist at IHS Markit. “Without a sustained pickup in demand, manufacturing output levels will likely remain subdued.”

— With assistance by Ailing Tan

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‘India can market itself better’

‘India is still hierarchical, but not as much as Japan and people appreciate a flat working culture,’ Charles Frump, managing director, Volvo Cars India, tells Pavan Lall.

How does a native of Minneapolis, USA, end up at a Nordic company, speak fluent Japanese, and then come to live in Gurgaon?

He could be an editor at the travel guides publisher Lonely Planet, but he isn’t and the reason for it is one thing I aim to find out as I switch on my Zoom connection to patch in to Charles Frump, managing director, Volvo Cars India.

Seconds later, I am face-to-face with the friendly 49-year-old American executive in a black round-neck T-shirt.

Frump has earlier wrapped up a 30-minute high-intensity interval training workout in a padded room that serves as a gym at his apartment in Delhi’s Vasant Vihar, followed by a series of meetings via videoconference.

“Where are you from?” I ask. Minneapolis was home to Frump, who got a double degree in mathematics and economics from the University of St Olaf, a private college in Northfield, Minnesota, ironically founded by a group of Norwegian-American immigrants.

Frump’s father was an HR executive with Toro, a maker of lawn-mowers, and his mother a teacher.

He never travelled much as a young man, visiting only contiguous countries Canada and Mexico for spring breaks.

Post graduation, Frump went to Chicago and worked for an IT company. His sister was in Japan at the time on a work programme and his mother wanted him to go and see how she was faring.

Frump had read his fair share of author James Clavell novels set in Japan (Tai-pan, Shogun and more), so he happily caught a plane to go to the Land of The Rising Sun which was to strike him as both exciting and mysterious.

When he landed he was a gai-jin, the Japanese word for a foreigner, but not for long.

He started teaching English there and in due course, being young and single, had sufficient motivation to learn Japanese.

In fact, he learned it so well that he even convinced his Japanese girlfriend to marry him, he jokes.

Almost on cue, Frump’s lunch is brought in by his wife, on a wooden tray, which he expressly thanks her for.

It’s Asian kimchi Ramen noodles in miso broth accompanied with a sliced boiled egg. It looks inviting, but not particularly easy to eat.

Mine is less exotic but simpler: Green beans, potato chips and a smoked salmon-and-cream sandwich. “Wow, but you need a bagel with it,” he says.

I agree, but the fact is I didn’t have the energy to call a delivery firm to have one sent in.

Nihonjin ni naru means to become Japanese. Did that happen to Frump? He shakes his head and explains that when he tied the knot, his wife explained he would have to submit his paycheck to her and she’d give him a small allowance and use the rest to run the home.

“I had to explain that wouldn’t be possible,” he says with a twinkle in his eye.

Three years later, in 1999, Frump and his girlfriend headed to the US where he got an MBA from UCLA, got married in 2000 and then started with the national dealerships department at Ford Motor Company in Dearborn, Michigan, and later San Francisco.

Between spoonfuls of his noodles, Frump says he never got a promotion for almost seven years, which was hard to digest for a young man.

Change was coming, though.

His next post would take him to work as brand manager for a tie-up between Ford and Changan in China, up the river from Wuhan in a gritty industrial town called Chongqing.

“Even the Chinese raise their eyebrows if you say you worked there,” he recalls.

He led the launch of the Ford Fiesta in China and 18 months later, he moved to Shanghai and then returned to Japan to join Volvo (Ford-owned) as head of marketing, where he enjoyed the added advantage of being the Japanese-speaking husband of a local.

In Japan, he worked for Volvo as a senior executive for sales and marketing for the 8000-size car market.

Then his boss left for China to join as MD, Volvo China, where the market size was 80,000 units a year — and an important one — and he found himself dragged back to China.

This time, he had a high-profile role, interacting with bureaucrats and senior executives. By 2010, Geely bought Volvo and he elected to stay on.

I’m done with my lunch; so is Frump and I am curious if he gets Japanese ingredients easily in New Delhi.

Easily, thanks to all the Japanese companies here, which include Suzuki, Honda and more. The coronavirus-led downturn notwithstanding, Frump says India has been the best role he’s had yet.

“Sales of cars couldn’t be worse with not a single sale — in my career, it’s unprecedented — but we now have dealers opening up which brings huge optimism because no-open dealers mean no sales and no service,” Frump says.

“The game for Volvo is all about crisis management and the approach is to break it into action packages. The first one was to get all employees home safe. The next is business continuity.”

To that end, Volvo has actually gone ahead and paid the salaries of all its dealers’ employees — 550 of them — for one month.

While he has huge appreciation for the talent pool here, he does wish the country would sell itself better.

“India can do much better on marketing itself.”

He points to the countless warnings that he got on getting “Delhi-belly” and how the water and food were contaminated all over the country, and says that he eats and drinks everything and has never had a problem.

After China, business for India must seem Lilliputian, doesn’t it?

“This is the smallest car market I have ever worked in and the fact is that there is a net revenue possibility if you equalise the taxation policy with premium versus non-premium cars.

Do that, and sales will go up and so will revenue,” he says. “Ten per cent of China’s car sales is premium because taxation is low, and also if prices were equalised, these cars would overnight not seem so ostentatious.”

Volvo sold around 2,300 cars here last year, a fraction of what it does in larger countries. Global sales were 700,000 for 2019.

Showing how Eastern he has become over the years, Frump says he is resigned to not seeing much change in the Indian car market anytime soon, but admits that the taxation and duty structure for electric vehicles will offer a more level-playing field.

What are the biggest cultural differences between India and China or India and Japan? In corporate Japan, the concept of nenko-joretsu reigns.

“It’s about getting promoted by age and staying with one company your entire life, which can become a challenge when companies age and growth slows down,” he says.

Everything is so precise there. He remembers his mother-in-law telling him when he got to a train platform to not get on to the 3:05 pm train when he was scheduled to leave by the 3:07 pm train. “The 3:07 pm train will come at 3:07 pm.”

By contrast, China has incredible infrastructure with its highways, airports and roads and the sense that the government is a strong player in the lives of people as well as their businesses, which, in Frump’s experience, has been a helpful and not a deterring factor.

“Language is still an issue in Japan, but not in China which is improving dramatically.”

The common denominator between China and Japan is how they throw human capital behind efforts in a way that can’t be fathomed in the West.

“India is still hierarchical, but not as much as Japan and people appreciate a flat working culture,” Frump says.

“The area that India needs to improve on is greater representation for women in the workforce.”

Volvo India had two women in management when he landed. That count now stands at nine.

In his free time, Frump does primarily one thing: Travel. In fact, he stops our conversation to point the camera at a book shelf to show me something: “We own very little, in fact, hardly anything. No cars, no house, no extra stuff. The only books we have are these,” he says.

I can see around 40 copies of Lonely Planet on a book shelf. South Africa, Spain, Nepal, Russia, Myanmar, Peru, Sri Lanka, and more.

Frump hits the road every summer travelling for as long as a month at a time with his wife. Guatemala, Colombia, Galapagos, Equador, and South Africa have been visited lately.

“Where will you settle down?” I ask.

“That’s an unacceptable question,” Frump jokes amidst laughter. “We are very mobile. Cape Town; Spain is an option.” It could really be anywhere.

As Frump says, he owns precious little that ties him down. “The most expensive thing my wife owns is a MacBook and for me it’s my ice hockey equipment.”

When you have visited 50 countries, the enduring lesson, it would seem, is be friendly, keep your ears and eyes open and travel light.

Production: Rajesh Alva/

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