Tesco cedes control to China Resources Enterprise in new venture

By IVCPOST Staff Reporter

Aug 09, 2013 02:11 PM EDT

International retailer Tesco Plc agreed on a joint venture with China Resources Enterprise Ltd but will cede control to the state-run firm. In the agreement, the world's third largest retailer will reduce its exposure in the mainland and hold only a 20% stake in the new partnership. Their combined market share, however, will put them neck and neck with Sun Art Retail Group Ltd, the market leader. Tesco had been operating in China for nine years.

Analysts viewed the joint venture as a Tesco's way of acknowledging defeat in the Chinese market. Nick Bubb, an independent retail analyst based in London said that Tesco's business in China was in the red. "Its partner brings formidable scale and local access, so it is hard to fault the logic of the move, even if it reads badly for the initial gung-ho expansion into China under previous management," he said. A Hong Kong-based banker agreed. "This may look win-win, but in reality, Tesco is saying 'I can't figure out China'," he told Reuters.

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