Fuji to Buy Wal-Mart Photo Plants

Japanese film maker Fuji emerged Monday as the winning bidder for the photofinishing operations of Wal-Mart Stores Inc., a setback for U.S. rival Eastman Kodak Co. and more grist for negotiators in a trade dispute over the openness of both nations’ film markets.

Fuji’s acquisition, which includes six Wal-Mart photofinishing plants and a giant distribution network, would substantially bolster its presence in the United States, where it has invested $1.5 billion in film, color paper and color finishing operations in the last decade.

Fuji Photo Film Co. operates 15 photofinishing plants and seven film manufacturing operations. An additional manufacturing plant and distribution facility are under construction, according to the company.

The Wal-Mart purchase, whose value was not disclosed, requires the approval of the Federal Trade Commission. Bentonville, Ark.-based Wal-Mart is not selling the one-hour photofinishing labs located inside its stores.

Wal-Mart shares fell 50 cents to $24 and Kodak lost 75 cents to $74.375, both on the New York Stock Exchange. Fuji’s shares fell $1 to $30.375 on Nasdaq.

“We have been building a network of wholesale photofinishing laboratories throughout the country,” said Tom Shay, a spokesman at Fuji’s U.S. headquarters in Elmsford, N.Y. “By adding to that network, we have improved our position and our ability to serve our wholesale customers.”

Kodak spokesman Charles Smith voiced disappointment over the loss of the Wal-Mart contract. Kodak had supplied most of the paper and chemicals to Wal-Mart, which operates one of the country’s four largest photofinishing operations.

But Kodak and Wal-Mart executives expressed confidence that the two companies would continue doing business, because the 2,253 Wal-Mart and 433 Sam’s Club stores would still carry Kodak film, cameras and other products.

Fuji and Rochester, N.Y.-based Kodak used Monday’s news to bolster their arguments in the bitter trade dispute sparked by Kodak’s claim that Japanese government and business interests have colluded to keep foreign companies out of that lucrative film market.

Since filing its claim a year ago, Kodak has made some progress in Japan, including the signing of a distribution agreement with the 1,000-store Co-op discount chain. But Kodak contends its 9% market share in Japan remains far too low because of unfair competitive practices that keep foreign products out of Japanese stores.

By contrast, Smith said, Fuji’s planned acquisition of the Wal-Mart business demonstrates just how open the U.S. market is to foreigners.

“Competitive bidding in the way that happens in this country just doesn’t happen in Japan,” he said. “We don’t have the opportunity to enter into a competitive bidding situation.”

But Fuji spokesman Shay called the Wal-Mart acquisition an example of Fuji’s commitment to making inroads in the United States in spite of obstacles similar to those experienced by Kodak in Japan. Those include difficulty breaking into established distribution networks, particularly those serving smaller shops.

“If Kodak made the same level of commitment there [in Japan], perhaps it would be more successful,” Shay said.

Last month, the Clinton administration agreed to take Kodak’s claim to the World Trade Organization, the international body that oversees disputes between member countries.

Negotiators from both countries are scheduled to meet later this week in Geneva to try to resolve the matter, the first step in the WTO dispute-resolution process.

Jeffrey Schott, a trade specialist at the Institute of International Economics, a Washington policy research group, said he doesn’t expect the Wal-Mart acquisition to have much impact on the WTO case, although it could have ramifications in the court of public opinion.

“I don’t think as a matter of procedure that it would be relevant to the legal case, but it might have more of an impact on the PR campaign,” he said.