Wal-Mart raises stake in Japanese retailer Seiyu

TOKYO -- Wal-Mart Stores has raised its stake in money-losing Japanese retailer Seiyu to 95.1 percent, the retailers said Wednesday, giving it managerial control of the chain and solidifying its foothold in an intensely competitive market.

Wal-Mart Stores Inc., the world's biggest retailer, already owned 50.9 percent in Seiyu Ltd. It offered to buy outstanding shares to gain full ownership in hopes of speeding management decisions for Seiyu's turnaround.

Since entering the Japanese market in 2002, Wal-Mart has been gradually raising its stake in Seiyu, the fifth-biggest retailer here with about 400 stores nationwide.

But Wal-Mart has struggled to make money in this market, where mall-style shopping is increasingly popular although for everyday food and other needs, shoppers tend to go to smaller neighborhood stores.

Still, the move puts to rest questions about whether Wal-Mart may exit Japan after the retailer sold its operations in Germany and South Korea last year.

"We are very pleased with the positive response to this tender offer," Wal-Mart Vice Chairman Mike Duke said in a statement.

"This successful result paves the way to achieve our stated goal of full ownership of Seiyu, which will enable Seiyu and Wal-Mart together to accelerate the delivery of long-term benefits to our customers, the communities we serve, our associates and our business partners," said Duke.

Under the 93 billion yen ($843.9 million) deal for more than 411 million shares, Wal-Mart paid 140 yen ($1.27) for each Seiyu share it didn't own. The offer ended Tuesday.

Wal-Mart said it aims to acquire all remaining Seiyu shares, which will result in Seiyu's delisting from the Tokyo Stock Exchange.

In Japan, 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 and major local companies that are introducing Wal-Mart-style mega-stores and price-slashing. The chain has continued to lose money since Wal-Mart struck the Japan partnership. Seiyu has said it's expecting its sixth straight year of losses this year.

Wal-Mart officials have introduced large-scale distrubition centers that have proved successful in the U.S. and have tried to adapt its global brands to the Japanese market.

But some analysts say Wal-Mart may lack intimate knowledge of how the Japanese market works.

Jun Kawahara, analyst at Shinko Securities Co. in Tokyo, says Japanese tend to frequent neighborhood shops on their bicycles and engage in a great deal of comparison-shopping at many stores -- rather than the typical American shopper who may drive to Wal-Mart for one-stop shopping.

"Japanese consumers are very sophisticated. It's not enough that products are cheap," he said.

Wal-Mart also faces competition from Japanese retail giants such as Aeon Co. that have adopted Wal-Mart-style tactics, including in-house brands and supercheap prices, and have succeeded in wooing suburban shoppers.

Seiyu's losses for the first nine months of this year narrowed to 11.42 billion yen ($103.6 million) from 59.55 billion yen a year earlier, due to large asset write-down costs it booked last year, according to Seiyu. Sales for that period slipped 0.7 percent to 700.93 billion yen ($6.36 billion).

Wal-Mart has about 3,000 stores outside the United States. The Bentonville, Arkansas-based company has more than 4,000 U.S. stores, serving more than 176 million customers weekly.

Wal-Mart's growth has been helped by aggressive overseas expansion in recent years, buying companies or expanding its stake in partners in China, Brazil and Central America. It signed a joint venture in India earlier this year.

Wal-Mart's third-quarter profit rose 8 percent on better-than-expected revenue of $91.95 billion, up nearly 9 percent on year.

Seiyu shares rose 3 percent in Tokyo Wednesday to close at 137 yen ($1.24).