Wednesday, July 21, 2004
UK retail giant Tesco enters China
Our Bureau / Bangalore July 19,2004
Tesco, the UK-based $56 billion retail giant, which has just started its first shared services centre in Bangalore, has made a foray into the Chinese market.
Tesco has signed a 50: 50 joint venture agreement with Ting Hsin, for its wholly owned subsidiary of Ting Cao, which owns the Hymall chain of stores in China.
Tesco will acquire 50 per cent of Ting Cao's equity in Hymall for $260 million cash, valuing the whole business at $520 million. The transaction is expected to complete within four months.
Hymall currently operates a chain of 25 hypermarkets with plans to open up to 10 more stores in the coming year. It is a profitable business with sales of $613 million and profit after tax of $10.1 million in 2003.
International growth forms a key segment of Tesco's four-part strategy. This joint venture represents Tesco's move into China, a market Tesco has been researching for a number of years.
The Hymall hypermarkets average 89,000 sq. ft in size with most located in high quality shopping mall developments.
Hymall's stores serve around two million customers each week and are mainly located in the east, north and northeast of China.
According to Terry Leahy, chief executive, Tesco, "It is a tremendous opportunity to acquire a 50 per cent stake in an established and profitable local business with strong local management. Hymall is already a leading retailer in Shanghai, China's largest retail market and the chain of 25 hypermarkets provides an excellent base of stores from which we can grow together."
Worldwide, Tesco has 2,318 stores and employs 3.26 lakh people in the 12 countries in which its operate. In Asia, Tesco has 179 stores and 34,000 employees across its businesses in Thailand, South Korea, Taiwan, Malaysia and Japan.