Aug 31, 2023 - Economy

A big private equity deal sparks a rare worker strike in Japan

Illustration of a Japanese flag with a red angry emoji face as the center sun.

Illustration: Aïda Amer/Axios

Around 900 union workers at Japanese department store operator Sogo & Seibu went on strike Thursday, protesting a pending acquisition by U.S. investment firm Fortress Investment Group.

Why it matters: Labor disruptions in Japan have become rare, with fewer than two dozen strikes last year that lasted more than half a day.

  • Also increasingly unusual are corporate acquisitions in which the buyer knows it's strongly opposed by the workforce, whether organized or not.

The big picture: Sogo & Seibu has approximately 100,000 customers visit its flagship store each day. This the first strike in its history, and the first by workers of a major Japanese department store since 1962.

Backstory: Seven & i, the Tokyo-listed owner of convenience store chain 7-Eleven, agreed in 2022 to sell unprofitable Sogo & Seibu for $1.5 billion to Fortress, owned by Japan's SoftBank.

  • But the deal closing has been repeatedly delayed, due to objections from workers and some local government officials.
  • Specifically, Fortress plans to make discount electronics retailer Yodobashi Camera a major tenant within Sogo & Seibu — i.e., a "shop-in-shop" — and the union believes the move could cheapen the store's reputation, thus ultimately destroying jobs.
  • Meanwhile, SoftBank earlier this year agreed to sell Fortress to Abu Dhabi sovereign wealth fund Mubadala and Fortress management, thus eliminating the firm's Japanese ownership.

Timeline: Despite knowledge of the pending strike, Seven & i's board voted to affirm the sale, and Fortress this morning announced that its acquisition will close tomorrow.

  • Fortress said in its press release that it plans to "maintain Sogo & Seibu's workforce to the extent possible."
  • The firm declined to comment further when contacted by Axios.

The bottom line: Private equity has taken pains over the past decade to appear more worker-friendly, at least upon introduction, including a growing initiative to provide employees with equity upside.

  • This deal is a hard turn in the opposite direction, in a country where the departure is particularly conspicuous.
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