Wal-Mart to buy rest of Japanese subsidiary

Wal-Mart Stores Inc. said Monday that it would spend $875 million to take full ownership of its money-losing Japanese subsidiary, Seiyu Ltd., as the U.S. retailer struggled to speed up management changes and revive slumping performance in the world’s second-largest economy.

Reversing losses in Japan would be an added boost to Wal-Mart’s already fast-growing international business at a time when growth in its home market is flagging.

Wal-Mart, which owns a 50.9% stake in Seiyu, will pay $1.23 for each share of the Japanese supermarket chain operator it does not yet own, the company said.

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 today to Dec. 4., is successful, it said.

“Today’s announcement is a reaffirmation of our commitment to Japan,” Wal-Mart Vice Chairman Mike Duke said.

“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.

The move could end questions about whether Wal-Mart would exit Japan after it sold similar loss-making operations in Germany and South Korea last year. Like Japan, those are wealthy developed countries.

Wal-Mart has profitable stores in Britain and Canada, but much of its international operation is now focused on expanding in developing countries such as China, Brazil, India and several nations in Central America.

“If Wal-Mart didn’t think they could turn Japan around, they would have sold it,” said Patricia Edwards, managing director and retail analyst at Wentworth, Hauser & Violich in Seattle.

Edwards said taking full control would make it easier for Wal-Mart to run Seiyu and make faster changes without having to manage minority partners.

Since entering the Japanese market in 2002, Wal-Mart has been gradually raising its stake in Seiyu, which has about 400 stores nationwide.

Wal-Mart’s stores in 13 countries outside the U.S. are growing faster than its home business. Wal-Mart does not release figures for individual countries. However, international sales overall rose 30% last year, compared with 11% at U.S. stores, to account for 22% of the company’s total sales of $345 billion.

Growth has been helped by aggressive expansion in the last two years as Wal-Mart bought companies or expanded its stake in partners in China, Brazil and Central America. It signed a joint venture in India this year.

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, as well as from major local companies that are introducing large Wal-Mart-style stores and price cutting.