Retail giant Walmart will sell 85 percent of its Japanese subsidiary Seiyu to investment firm KKR and e-commerce group Rakuten, the pair announced Monday.

The deal, which values Seiyu at 172.5 billion yen ($1.6 billion), is expected to close in the first quarter of next year, with New York-based KKR acquiring 65 percent of the supermarket chain.

Japan's Rakuten -- which already set up an online grocery delivery service with Seiyu in 2018 -- will buy 20 percent and set up a new subsidiary called Rakuten DX Solution focused on internet sales.

Walmart first acquired a stake in Seiyu in 2002 and later made it a wholly owned subsidiary despite poor financial results
Walmart first acquired a stake in Seiyu in 2002 and later made it a wholly owned subsidiary despite poor financial results AFP

Walmart will keep the remaining shares in Seiyu, which was founded in the 1960s and has more than 300 stores in Japan.

The US retail behemoth first acquired a stake in Seiyu in 2002 and later made it a wholly owned subsidiary despite poor financial results.

The agreement "will allow Seiyu to benefit from the combined business expertise of KKR, Rakuten and Walmart... and accelerate its digital transformation", Monday's statement said.

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