Wal-Mart Stores May Fully Control Ailing Seiyu

23/10/07 U.S. retail giant Wal-Mart Stores Inc. is considering taking full control of Japanese unit Seiyu Ltd. <8268> by the year-end to expedite the ailing supermarket chain's business turnaround, informed sources said Monday.

Wal-Mart Stores, which currently owns some 50 pct of Seiyu, is mulling acquiring the remaining Seiyu shares from existing shareholders, including major trading houses, the sources said. Wal-Mart Stores may also buy new shares to be issued by Seiyu, according to the sources.

Under the existing capital tie-up accord between the two companies, Wal-Mart Stores is allowed to exercise its equity purchase warrants to raise its Seiyu stake to 66.7 pct by the end of this year.

But the U.S. company is unlikely to exercise the warrants as the exercise price is far lower than current price levels of Seiyu stock, the sources said.

Seiyu stock, listed on the first section of the Tokyo Stock Exchange, has been trading above 85 yen recently after hitting an all-time low of 74 yen on an intraday basis on Sept. 21. The TSE suspended trading in the issue to give investors time to confirm information about Wal-Mart Stores' reported plan to raise its Seiyu stake.

Wal-Mart Stores, the largest retail business group in the world, fully entered the Japanese market by placing Seiyu under its wing in 2002.

The group has spent 147 billion yen since then to rebuild the company, which had been struggling after the collapse of Japan's economic "bubble." But Seiyu still faces its business plight.

For the business year ending in December, Seiyu expects to report a consolidated net loss of 10.4 billion yen, remaining in the red for the sixth straight year. In 2006, the company reported a net loss of 55,792 million yen.

Seiyu, set up in 1963, operates 392 stores in Japan.

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