Wal-Mart (WMT) announced Monday it will spend $875 million to purchase the remaining 49.1% it currently does not own of its money losing Japanese subsidiary, Seiyu Ltd. The plan is too speed up management changes and reverse slumping performance.
Seiyu’s board supports the 100 billion yen tender offer. The Japanese retailer will be delisted from the Tokyo Stock Exchange if the offer, set to run from Oct. 23 to Dec. 4., is successful, it said. “Today’s announcement is a reaffirmation of our commitment to Japan, the second largest economy in the world,” Wal-Mart Vice Chairman Mike Duke said in the statement. Rumors were that Wal-Mart would exit the market but when you consider they have made significant investments setting up a distribution facility, introducing its computerized systems, remodeling stores and opening large-scale supermarkets in the country, an exit was unlikely.
Wal-Mart first entered the Japanese market in 2002 and has been consistently raising its stake in the Japanese retailer, which has some 400 stores nationwide. Wal-Mart stuck with the Seiyu brand, familiar to Japanese, instead of using the Wal-Mart name. Surprisingly, Seiyu has struggled amid intense competition from smaller retail chains and major local companies that are introducing large Wal-Mart-style stores and price-cutting. Essentially, they out Wal-Marted Wal-Mart.
Hopefully, the first thing Wal-Mart will do is change the name and run as a Wal-Mart. If competitors are running their businesses like a Wal-Mart and it is working, why not let folks know the gloves are off and if its Wal-Mart style stores you want, you got it? Give then what they want.
On another note it is great to see the international commitment from management. I have been beating this drum more than once since we first bought shares in June and then again in August. If the company wants to expand its footprint, overseas is the place to do it now.
