State-owned company to take over Tesco’s stores
Print Edition
British retail giant Tesco is paying a Chinese state-owned company US$558 million to take over its supermarkets in China after failing to make headway on its own since entering the country a decade ago.
Tesco’s 134 Chinese mainland stores and its shopping mall business are being taken over by China Resources Enterprises Ltd, which is the supermarket leader with about 3,000 stores across the country. In exchange, Tesco gets a 20 percent stake in a joint venture with China Resources that will operate the combined retailing businesses.
The China business of Tesco, Britain’s biggest retailer by sales, suffered a pre-tax loss of 222 million pounds (US$360 million) in its most recent financial year. The year before, it lost 125 million pounds.
“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 CEO Philip Clarke said yesterday.
Tesco has an option for an additional 5 percent five years after the deal is done. Some HK$4 billion of the payment will go to China Resources as a special dividend, with the rest to be used as working capital.
The joint venture will operate supermarkets, hypermarkets, convenience stores, cash and carry businesses and liquor stores, as well as online versions of these businesses. It will be the leading retailer in seven of China’s eight wealthiest and most populous provinces, Tesco said.
Tesco, which entered China in 2004, has stores in 11 provincial areas, most of them in Shanghai and Tianjin and the northeastern province of Liaoning.
The deal is expected to close in the first half of 2014, subject to regulatory and shareholder approval. China Resources said the tie-up will combine “local customer insights and international retail best practice” and also drive the “internationalization” of China’s retail industry.
China Resources is the market leader in the country’s highly fragmented supermarket business, with 3 percent share of a grocery market worth 3.8 trillion yuan (US$620 billion), according to Euromonitor International.
Revenue at the combined business is expected to be nearly 10 billion pounds a year.
The announcement comes as Tesco scales back an aggressive international expansion to refocus on its mainstay UK market. The company reported yesterday that interim net profit fell by about half to 820 million pounds.
Earlier this year, Tesco beat a retreat from the US by selling off the unprofitable Fresh & Easy supermarket chain it had opened just before the start of the economic crisis. It also said it would leave Japan.
Last year, US-based home improvement retailer Home Depot Inc, which entered China in 2006 by acquiring a local chain, closed its seven remaining big box outlets to focus on Internet-based sales and specialty stores.
In 2011, US electronics retailer Best Buy stunned customers and employees when it closed all nine of its Best Buy-branded Chinese stores in order to focus on its Five Star outlets, which it acquired through the purchase of a provincial retailer.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
