U.S. retail giant Wal-Mart taking minority stake in Japanese retailer

TOKYO (AP) _ Wal-Mart Stores is buying a minority stake in Japanese retailer Seiyu in a deal that gives the U.S. retail giant a foothold in the world's second-largest economy. <br><br>Wal-Mart will

Thursday, March 14th 2002, 12:00 am

By: News On 6

TOKYO (AP) _ Wal-Mart Stores is buying a minority stake in Japanese retailer Seiyu in a deal that gives the U.S. retail giant a foothold in the world's second-largest economy.

Wal-Mart will buy 6.1 percent of Seiyu stock for 6 billion yen ($46 million) in May, the companies announced Thursday. It is the latest step in the global expansion of Wal-Mart which already is in Europe, South America and other parts of Asia.

The Bentonville, Ark.-based retailer has the option to buy a third of Seiyu stock by the end of 2002, half of Seiyu stock by 2005 and two-thirds by December 2007, the companies said.

``We view this as a first step in a long-term partnership,'' Wal-Mart senior vice president Charles Holley told reporters in Tokyo. ``We're very excited about the Japanese market.''

Wal-Mart, with more than $200 billion in annual sales and more than 3,000 stores in the United States, is the world's largest retailer.

But whether Wal-Mart can repeat in this notoriously difficult market the success it has won in other parts of the world remains to be seen, analysts say.

Yasuyuki Sasaki, analyst at Credit Suisse First Boston in Tokyo, said Wal-Mart should not count on immediate success in Japan but could win over the public if it's patient.

``It won't be accepted immediately,'' he said. ``But the gap between the rich and the poor is growing in Japan and the demand for discount stores is sure to go up.''

Japanese buyers tend to be finicky and have at times shunned products that are viewed as cheap or poor quality. On the plus side for Wal-Mart is that discount stores have been recently growing more popular as this nation sinks into recession.

Wal-Mart gave few details of its business plan in Japan, saying that will be announced later after more research in the months ahead on Japanese consumers' needs.

Holley refused to say when Wal-Mart was opening its first large-scale discount store here and repeatedly stressed it was too early to make predictions about Wal-Mart's potential in Japan.

But Holley was confident the Wal-Mart strategy of offering low prices would work in Japan because the strategy has done well in other ailing economies such as Mexico.

``That's why we are here,'' he said.

Officials said Seiyu would benefit from Wal-Mart's knowledge in cheap procurement and use of computer technology to save costs.

``Japanese retail is undergoing change, and we felt a need for a strategic partner,'' Seiyu president Masao Kiuchi said.

Seiyu shares shot up nearly 27 percent on the Tokyo Stock Exchange, closing at 380 yen ($3) on speculation about the Wal-Mart alliance, which was announced after trading ended.

Founded in 1963, Seiyu is one of Japan's top retailers with group annual revenue of more than 1 trillion yen ($7.8 billion), running supermarkets, shopping centers and department stores. It now employs about 12,500 workers.

But these have been hard times for the retail industry here. A slowdown has dragged on for more than 10 years in this nation. Japanese retail giant Daiei is taking a huge bank bailout. Major retailer Mycal has gone bankrupt.

Even Seiyu, which has avoided losses, felt it could use the boost from the extra cash and help from a global partner like Wal-Mart if it hoped to keep abreast of competition in tough times.

As part of Thursday's deal, Sumitomo, a major Japanese trading company and Seiyu's largest shareholder, is paying 5 billion yen ($39 million) to increase its share in Seiyu by 5.1 percent to about 15.6 percent. The agreement is subject to approval by Seiyu shareholders.

``This alliance is a birth of a partnership to withstand intensifying competition,'' said Sumitomo senior vice president Fumio Wada.