Wal-Mart Stores Inc., based in Bentonville, Ark., has agreed to purchase a stake in leading Japanese retail chain The Seiyu Ltd. The partnership opens the door for Wal-Mart to expand into the Japanese retail market, and eventually gain control of Seiyu. As part of the deal, Sumitomo Corp. K.K., Seiyu’s largest shareholder, also will increase its holding in Seiyu.
Wal-Mart — the world’s largest retailer with more than $200 billion in sales each year — will pay about 6 billion yen, or $46 million, for 6.1% of Seiyu’s stock. Sumitomo will pay about 5 billion yen, or $38 million, for 5.1% of Seiyu’s stock. The transaction also will allow Wal-Mart to raise its stake in Seiyu to 66.7% over time and Sumitomo to raise its share to 15.1%.
But Wal-Mart will face a challenge in this notoriously difficult market, analysts say. Japanese buyers tend to shun products viewed as cheap or poor quality. 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. "The gap between the rich and the poor is growing in Japan and the demand for discount stores is sure to go up," he says.