Wal-Mart Stores Inc. said Monday it will take full ownership of its money-losing Japanese subsidiary, Seiyu Ltd., as the U.S. retailer struggles to speed up management changes and reverse slumping performance in the world's second largest economy.
Wal-Mart, which owns a 50.9 percent stake in Seiyu, will pay $1.23 (140 yen) for each share of the Japanese supermarket chain operator it does not yet own, the company said in a statement.
The move represents an additional investment by the world's largest retailer, of up to $875 million in Japan.
Seiyu's board voted Monday to support Wal-Mart's 100 billion yen tender offer, according to the statement. The Japanese retailer will be delisted from the Tokyo Stock Exchange if the tender offer, set to run from Oct. 23 to Dec. 4., is successful, it said.
"Today's announcement is a reaffirmation of our commitment to Japan, the second largest economy in the world," Wal-Mart Vice Chairman Mike Duke said in the statement.
"The Japanese retail market is of major strategic importance to Wal-Mart, and our goal is to achieve long-term success and growth in Japan," Duke said.
Trade in Seiyu shares on the TSE was suspended early Monday following news reports of the impending deal.
A faster takeover of the Japanese unit could help Wal-Mart implement management changes and what has been a poor performance.
It would also quell speculation that the company might quit Japan altogether. The U.S. retailer got out of Germany and South Korea last year after years of losses.
Since entering the Japan market in 2002, Wal-Mart has been gradually raising its stake in the Japanese retailer, which has some 400 stores nationwide.
Wal-Mart has stuck with the Seiyu brand, familiar to Japanese, instead of using the Wal-Mart name.
But Seiyu has struggled amid intense competition from smaller retail chains, as well as from major local companies that are introducing large Wal-Mart-style stores and price-cutting.
The Japanese retailer said in fresh earnings results announced Monday that it expects to book its sixth straight year of losses this year, with a 10.40 billion yen ($90.90 million) loss amid poor sales and ballooning restructuring costs.
Its net loss in the nine months to Sept. 30 narrowed to 11.42 billion yen ($99.81 million) from 59.55 billion yen a year earlier, due to large asset write-down costs it booked last year, Seiyu said in a statement.
Group sales in the nine-month period slipped 0.7 percent to 700.93 billion yen ($6.13 billion), while same-store sales fell 1.0 percent, Seiyu said.
Meanwhile, earnings at Wal-Mart have faltered this year on slower consumer spending in the U.S. and abroad, but third quarter profits are expected to be better due to cost controls at U.S. stores.
Wal-Mart is also expanding aggressively in emerging markets like China and India.
Aside from Seiyu, Wal-Mart has also made significant investments in Japan, the world's second-largest retail market after the U.S., setting up a distribution facility, introducing its computerized systems, remodeling stores and opening large-scale supermarkets, which had been relatively rare in the past.