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Wal-Mart takes control of Japanese retailer

Wal-Mart will raise its stake in Japanese retailer Seiyu to more than 50 percent from 42 percent by December, Seiyu said Friday, a move that will turn it into a subsidiary and expand the U.S. chain's foothold in the world's second biggest retail market.
/ Source: The Associated Press

Wal-Mart will raise its stake in Japanese retailer Seiyu to more than 50 percent from 42 percent by December, Seiyu said Friday, a move that will turn it into a subsidiary and expand the U.S. chain’s foothold in the world’s second biggest retail market.

Seiyu will issue new ordinary and preferred shares totaling 115 billion yen, or $1 billion, and Wal-Mart will purchase up to 67.5 billion yen, or $597 million, worth of the shares, while Mizuho Corporate Bank Ltd., a major Japanese bank, and possibly other investors will acquire the rest, the Tokyo-based supermarket chain said.

Since arriving in Japan in 2002, Bentonville, Ark.-based Wal-Mart has been gradually raising its stake in Seiyu, which operates more than 400 stores here.

Under a partnership with Seiyu, Wal-Mart has been gradually introducing its computerized systems, cost cuts and global-supply chain to its Japanese stores by remodeling stores and opening large-scale supermarkets, which are still relatively rare here.

The capital investment is subject to shareholders’ approval in December 2005, according to Seiyu.

The move reflects Wal-Mart’s commitment to the Japanese market at a time when Seiyu has been struggling and losing money.

Seiyu’s losses for the fiscal first half widened nearly fourfold from a year ago to 10.59 billion yen ($94 million) due to sliding sales. It is forecasting a loss for the full fiscal year, although it had hoped to return to the black this fiscal year.

“This investment is intended to give Seiyu increased financial stability and continue strengthening Wal-Mart’s presence in the second largest retail market in the world,” John Menzer, president and chief executive of Wal-Mart International, said in a statement.

Seiyu shares jumped nearly 15 percent to 271 yen on the Tokyo Stock Exchange Friday. While the announcement was made after the market closed, word of a possible deal seemed to have spread beforehand.

Seiyu Chief Executive Noriyuki Watanabe said becoming “a full member of the Wal-Mart family” will offer a stable financial base, allowing Seiyu to accelerate remodeling stores and opening new ones. It will also bring cheaper prices, he said.

“Seiyu will grow by providing great value of quality fresh food and other everyday necessities for our customers and making sure we cater to their local needs,” he said in a statement.

Watanabe, who became chief executive this year after his predecessor resigned to take responsibility for the losses, said he expected no management overhauls as a result of the planned changes. Details of the new share issues will be decided in early November, Seiyu said. Watanabe served as president of Seiyu from 1998 to 2001.

Wal-Mart has widespread international operations, including Mexico, Germany, South Korea and Canada. But it has not scored a big hit yet in Japan, where the retail market is extremely competitive and shoppers tend to be finicky.

Carrefour SA of France, the world’s No. 2 retailer, abandoned the Japanese market earlier this year after it failed to woo buyers.

Once a total novelty in Japan, Wal-Mart-style gigantic stores are becoming gradually more accepted in this nation, which had been dominated by mom-and-pop stores for decades. Some Japanese retailers are starting to imitate Wal-Mart methods.

Wal-Mart has also learned that it needs to cater products to the local market, and some of its fashion items, for example, have not done as well as they have elsewhere.

Wal-Mart officials have said success in Japan will take time.