Tesco Plc would extend its reach into China with its new investment

By Marc Castro

Oct 02, 2013 09:41 AM EDT

The UK retail giant Tesco Plc would be paying HKD4.33 billion or USD588 million in exchange for 20% of a venture with China Resources Enterprise Ltd. This would be the retailers push towards the markets within the world's most populous country.

The venture, which was announced last August, would combine Tesco's businesses in China, where 3,000 stores are owned by a state owned corporation operating in both China and Hong Kong. The companues intend to operate supermarkets, liquor shops and convenience stores for the Greater China area. In a statement, China Resources would own 80% of the venture.

This deal would also provide Tesco a platform in one of the world's burgeoning markets, especially the USD574 billion hypermarket industry. China Resources, which runs the country's second-largest hypermarket business, would develop through Tesco's expertise in areas including private labels, e-commerce and international sourcing.

According to Tesco CEO Philip Clarke, in a separate statement, "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."

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