Tesco Confirms China Merger Talks
Tesco has confirmed it is in exclusive talks over combining its Chinese operations with a major supermarket operator in the country.
While it is unclear at this stage whether a deal would mean the Tesco brand disappearing in China, Britain's biggest retailer updated investors on the talks after they were made public by Sky's City Editor, Mark Kleinman.
Its statement said: "Noting recent media speculation, Tesco Plc 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."
Tesco said the proposed joint venture would create a business with sales of some £10bn, in which CRE and Tesco's effective interests are expected to be split 80% and 20% respectively.
The proposed deal - which would represent a significant watering down of Tesco's China operation - would involve CRE combining its CR Vanguard business, which operates 2,986 stores across China and Hong Kong, with Tesco China's 131 stores and shopping centre business.
"The intended partnership follows a series of highly successful joint ventures between CRE and other multinational corporations and is consistent with Tesco's stated strategy of focusing on profitable routes to growth in fast-growing but less mature markets," Tesco said in the statement.
"The transaction is subject to further due diligence and agreement of final terms. There is no certainty that a transaction will occur," it added.
According to Chinese media the company has failed to turn a profit in nine years in China.
Tesco recently closed its operations in Japan and in the US and it moved to improve its core UK supermarket business.