Troubled Japanese retailer Seiyu to raise more capital from Wal-Mart

TOKYO, Aug 12 (AFP) - Troubled Japanese supermarket chain Seiyu said Tuesday it will raise 7.74 billion yen (65 million dollars) by issuing shares to controlling shareholder, US retail giant Wal-Mart Stores, and other investors.

Seiyu will issue a total 35.0 million shares at 221 yen each, with 20.2 million shares worth 4.46 billion yen going to Wal-Mart Stores' subsidiary Wyoming Holding GmbH.

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Seiyu shares closed at 231 yen, down two yen off a high of 247 yen on the Tokyo Stock Exchange Tuesday afternoon.

Japanese trading house Sumitomo Corp. will acquire 3.5 million shares, with the remainder going to other investors including Merrill Lynch Investment Managers Limited.

The capital increase will take place on August 30, the company said.

Wal-Mart's ownership of Seiyu shares will increase slightly to 37.8 percent from the current 36.6 percent. Wal-Mart has an option to raise its stake in Seiyu to 66.7 percent by the end of 2007.

The new capital will help Seiyu to continue steps it is taking to lower its cost structure, such as purchasing store sites to eliminate costly rental charges, Seiyu president Masao Kiuchi told a press conference.

"Seiyu, in cooperation with our top shareholder Wal-Mart, is restructuring our business model so that we will be able to offer good products at low prices," he said.

"To do that, and in light of our (weak) earnings in the first half, we are increasing our capital," he said.

"I will be spearheading efforts to beef up sales initiatives. With Wal-Mart's help, especially in the area of international procurement, we will introduce directly imported products and we will launch new exclusive brands," Kiuchi said.

Seiyu will also conduct monthly major in-store promotions and other measures to attract customers, Kiuchi said.

"We believe those strategies will gradually bear fruit in the future," he said.

Last week Seiyu said it expected to post a net loss of 10 billion yen for the March-December period, reversing an earlier 3 billion yen profit forecast.

The company attributed the loss to weak sales due to continuing falls in private consumption as well as to bad weather. Revenue is expected to decline to 950 billion yen, compared with 980 billion in its previous forecast.

In July, Seiyu's existing store sales were estimated to have fallen nine percent year on year, Kiuchi said.

"We have been slow to react to the current cooler-than-usual summer as competition from others heated up," Kiuchi said.

In March, Seiyu said its shareholders had approved the appointment of five Wal-Mart executives to its 13-member board.

It followed Wal-Mart's announcement a year earlier that it would invest six billion yen in Japan's fifth-largest supermarket chain, which operates more than 400 stores mostly in the Tokyo area.

In December last year Wal-Mart said it was paying a further 52.1 billion yen to lift its stake.

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