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Wal-Mart boosting its presence in Japan

Wal-Mart Stores Inc. will make struggling Japanese affiliate Seiyu Ltd. a subsidiary this year, lifting its stake to over 50 percent to boost its presence in the Japanese market, the Nihon Keizai business daily reported on Tuesday.
/ Source: Reuters

Wal-Mart Stores Inc. will make struggling Japanese affiliate Seiyu Ltd. a subsidiary this year, lifting its stake to over 50 percent to boost its presence in the Japanese market, the Nihon Keizai business daily reported on Tuesday.

The paper said the world’s biggest retailer will buy new shares in loss-making Seiyu, Japan’s fourth-biggest retailer, to raise its stake from the current 42.4 percent.

Wal-Mart and Seiyu both said no decision has been made. Wal-Mart waded into Japan’s notoriously competitive and fickle retail market in 2002 by taking 6 percent of Seiyu, and it has gradually raised its stake since then.

It has an option to boost its stake in Seiyu to 50.1 percent by the end of 2005, and it has been widely expected to exercise the option and to inject fresh capital into Seiyu to prevent it from falling into negative net worth.

But there was also speculation that Wal-Mart might weaken the tie with Seiyu after the Japanese retailer posted net losses for three straight years.

A Wal-Mart spokeswoman said Seiyu was considering renovating about 200 of its 405 group stores in the five years through 2009, and said the report was likely based on speculation that Seiyu would need fresh capital to do so.

The paper said Seiyu would invest about $450 million (50 billion yen) from the injected capital to remodel the stores in an effort to win back customers from rivals including Aeon Co., Japan’s biggest retailer, and second-ranked Ito-Yokado Co.