Tesco extends China reach
STRONGER PLATFORM: UK retailer to pay US$558m for 20pc of China Resources
TESCO Plc, the largest British retailer, will pay HK$4.33 billion or US$558 million (RM1.8 billion) to gain 20 per cent of a venture with China Resources Enterprise Ltd to extend its reach in the world's most populous nation.
The venture, announced in August, will combine Tesco's 134 outlets and shopping-mall business in China with the almost 3,000 stores owned by the state-backed conglomerate in China and Hong Kong.
The two companies plan to run supermarkets, convenience stores and liquor shops in the Greater China region, China Resources, which will hold 80 per cent of the venture, said in a statement yesterday.
The deal would allow Tesco to expand in China's US$574 billion hypermarket industry while ending almost a decade of independent operations as sales fall amid competition from rivals such as Sun Art Retail Group Ltd.
China Resources, which runs the country's second-largest hypermarket business, would gain from Tesco's expertise in areas including private labels, e-commerce and international sourcing, the companies said.
"Through this deal we have a strong platform in one of the world's most exciting markets and it will move us more quickly to profitability in China," Tesco chief executive Officer Philip Clarke said in a separate statement.
Tesco's first-half earnings fell as European shoppers shunned its supermarkets and the company paid to win back customers in the UK.
So-called trading profit fell 7.6 pe rcent to STG1.59 billion, Tesco said yesterday. Operating profit in Europe fell 68 per cent.
Tesco said it expects to show an "improved trading performance" in the second half. The company repeated its goal of mid-single digit trading profit growth in the medium-term. Bloomberg