-Caveat Lector-
>From Int'l Herald Tribune
> Paris, Tuesday, June 15, 1999
>
>
> Wal-Mart Takes Big Leap Into Europe
>
> $10 Billion Gamble In U.K. Doubles Its International Business
>
>
> ----------------------------------------------------------------------
> -- By Tom Buerkle International Herald Tribune
> ----------------------------------------------------------------------
> -- LONDON - Placing a $10 billion bet that its brand of folksy
> American retailing and everyday low prices can conquer the hearts and
> wallets of European consumers, Wal-Mart Stores Inc. agreed Monday to
> buy ASDA Group PLC, Britain's third-largest food retailer.
>
> The cash deal, which topped a rival bid from the British retail group
> Kingfisher PLC, would double Wal-Mart's international business at a
> stroke and put it in a position to expand its retailing expertise
> throughout Europe.
>
> ''Our international strategy is still in its formative stages,'' said
> Donald Soderquist, senior vice chairman of Wal-Mart. The company aims
> to generate a third of its growth over the next five years outside the
> United States.
>
> Many retailers have stumbled in previous attempts to expand across
> borders, but analysts said the buying power of Wal-Mart - it is the
> world's largest retailer, with $137 billion in sales, equivalent to 10
> percent of Britain's gross domestic product - and the company's
> efficient management systems gave it a good chance to succeed. Sharp
> drops in the share prices of ASDA's British rivals indicated that many
> investors shared that view.
>
> ''It's going to have a major impact on the U.K.,'' said Mike Godliman,
> director of the retailing consultancy Verdict. ''You can't compete
> with Wal-Mart on price, because they're the biggest retailer in the
> world.''
>
> Wal-Mart is offering £6.7 billion ($10.8 billion), or 220 pence a
> share, for ASDA. That exceeded Kingfisher's existing share offer, and
> ASDA's share price last Friday, by nearly 20 percent. ASDA's shares
> jumped 33.5 pence to 218 pence, while Kingfisher effectively bowed out
> of the contest, saying it would not increase its offer.
>
> Kingfisher, which owns stores including the B&Q do-it-yourself chain,
> Superdrug and Woolworths in Britain along with Darty and BUT chains in
> France, had hoped to use ASDA to develop a chain of food and general
> merchandise superstores modeled after Wal-Mart. The company's shares
> fell 45 pence to 778.
>
> ''ASDA fits in perfectly with our international strategy,'' Mr.
> Soderquist said. The British company's emphasis on low prices, large
> suburban stores and an egalitarian workplace culture where workers are
> ''colleagues'' rather than employees matches many of the features that
> Wal-Mart has ridden to success in the United States, he said.
>
> Wal-Mart executives said they also hoped to draw upon ASDA's
> management talent and experience. ASDA's 229 stores are a little less
> than half the size of Wal-Mart's supercenters of more than 200,000
> square feet (18,000 square meters) in the United States, but the lack
> of space in much of Europe for new out-of-town shopping developments
> could make ASDA's formula more relevant as a platform for expansion,
> executives said.
>
> ''We're excited by what we can learn from you all,'' said Mr.
> Soderquist, who delighted in bringing the enthusiasm and
> colloquialisms of Bentonville, Arkansas, to the sober setting of
> London.
>
> Wal-Mart's shares rose 43.75 cents to close at $43.125 in New York
>
> Wal-Mart has set its sights on Europe for expansion. International
> stores, primarily in Mexico and Germany, generated only $12.2 billion
> of its $137 billion in sales last year. The addition of ASDA alone,
> which started as a supermarket but has aggressively added clothing and
> other merchandise to its shelves, will more than double international
> sales with its revenue of £8.9 billion last year.
>
> Wal-Mart owns 95 stores in Germany after buying the Wertkauf chain two
> years ago and buying 74 hypermarkets from Spar Handels last December.
> Many analysts say Wal-Mart will have to enter other Continental
> markets by acquisition because of the shortage of development sites.
>
> Mr. Soderquist declined to speculate about prospects for further
> acquisitions, saying Wal-Mart had ''a full plate,'' needing to
> complete the ASDA purchase and convert the German stores into Wal-Mart
> outlets.
>
> The Kingfisher offer for ASDA, which British analysts had regarded as
> a defensive move to thwart Wal-Mart's entry to Britain, forced
> Wal-Mart to accelerate its expansion plans and led to talks with ASDA
> in the past 10 days, said Jay Fitzsimmons, a senior vice president at
> Wal-Mart.
>
> ''They view Europe as an entity,'' said one banker involved in the
> transaction, who spoke on condition of anonymity. ''ASDA is a stepping
> stone to Europe. It's bound to have implications across Europe.''
>
> The immediate pressure was felt in Britain. Shares in Tesco PLC, the
> leading food retailer, fell 12.75 pence to 178, and J. Sainsbury PLC
> shares fell 18.5 pence to 372.
>
> ''They're going to bring in some real competition,'' said Matthew
> McEachran, an analyst at Investec Henderson Crosthwaite. ''These guys
> know how to price. They know how to shift volumes.'' The only major
> stock in the sector to advance was Safeway's, which shares rose 5
> percent to 257 pence amid reports that it would become the target of a
> bid from the U.S. supermarket chain Kroger Co.
A<>E<>R
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