Tesco has entered talks with a major supermarket retailer in China to combine its Chinese operations.
The British retailer has signed a Memorandum of Understanding with China Resources Enterprise (CRE), entering exclusive talks to join forces to form the leading multi-format retailer in China.
The partnership would involve CRE combining its CR Vanguard business, which currently operates 2,986 stores across China and Hong Kong, with Tesco China’s 131 stores and shopping mall business. CRE and Tesco’s effective interests are expected to be 80 per cent and 20 per cent.
Its statement said “Noting recent media speculation, Tesco Plc (“Tesco”) and China Resources Enterprise, Limited (“CRE”) today announce that they have entered into a Memorandum of Understanding and are in exclusive talks to combine their Chinese retail operations to form the leading multi-format retailer in China.”
Tristan Rogers, CEO of ConcretePlatform commented that the news was ‘unsurprising’ after Tesco’s recent high-profile failings via wholly owned expansion strategies.
He said: “However, whilst this could be seen as a knee jerk response to the City’s desire to jettison loss making “assets” from the Tesco PLC balance sheet, I think this approach is a more intelligent move towards stake holdings in profitable ventures, regardless of the name above the door.
“Indeed, in the press release, the spokesperson states that the merger “is consistent with Tesco’s stated strategy of focusing on profitable routes to growth in fast-growing but less mature markets”. Whilst this is hardly demonstrable of the Fresh and Easy business plan, it’s good to know the new management appreciate irony, but also tactical adjustments to their global ambitions.”
Tesco said that the Memorandum of Understanding agreement meant there was no certainty that a transaction would occur.