Orbis Investments Eyeing Japanese Drugstore Industry

According to the Japan chief of Orbis Investment Management, the prospect of more consolidation in Japan's fragmented drugstore industry is likely to boost the long-term value of major players.

Tsukasa Tokikuni of Orbis explains how the $63 billion industry has become more appealing to investors, even as Japan's population shrinks and store rollouts slow.

"In comparison to the United States and the United Kingdom, the Japanese drugstore market is still fragmented with various players," Tokikuni told Reuters in an interview. "Further market consolidation would help them expand sales while cutting costs through synergies."

Since Hong Kong-based activist investor Oasis Management launched a campaign against Tsuruha Holdings, calling for a board reshuffle, market expectations for more mergers in the sector have grown.

Orbis, based in Bermuda, has been investing in the Japanese drugstore sector for more than two decades, including Tsuruha, in which it now has a 5.6 percent stake.

According to Tokikuni, its holdings in Tsuruha and other drugstore chains such as Sundrug and Kusuri No Aoki Holdings account for more than 10% of Orbis' 400 billion yen ($2.9 billion) Japan portfolio.

He emphasised that Tsuruha, which has grown through multiple acquisitions, is uniquely positioned to benefit from potential consolidation because its track record of successful mergers positions the company as a viable suitor.