Tesco, CRE mull JV

Tesco, CRE mull JV

UK retailer Tesco and China Resources Enterprise (CRE) have confirmed they are in exclusive talks to combine their Chinese retail operations in a move the companies claimed would create "the leading multi-format retailer" in the country.

The companies said a JV would benefit from CRE's "deep understanding" of local customers and established national distribution. For its part, Tesco would bring its global retail know-how, international sourcing scale and supply chain capabilities to the table.

In a statement released today (9 August), the companies said the JV would create a business with sales of more than US$15bn. CRE would hold 80% of the venture and Tesco would hold the remaining 20%.

CRE operates 2,986 stores in China and Hong Kong through its CR Vanguard unit, while Tesco currently has a Chinese store portfolio of 131 outlets.

"The intended partnership follows a series of highly successful joint ventures between CRE and other multi-national corporations and is consistent with Tesco's stated strategy of focusing on profitable routes to growth in fast-growing but less mature markets, with a disciplined approach to the allocation of capital," the companies said.

The financial terms of the transaction are still under negotiation and there is "no certainty" that a transaction will occur, the companies said. 

Show the press release

Tesco and CRE sign Memorandum of Understanding to create the leading multi-format retailer in China
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.
The partnership would bring together CRE's deep understanding of local customers, established nationwide infrastructure and proven track record as a partner with Tesco's global retail expertise, international sourcing scale and supply chain capabilities.  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 80% and 20% respectively.
It 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.
The intended partnership follows a series of highly successful joint ventures between CRE and other multi-national corporations and is consistent with Tesco's stated strategy of focusing on profitable routes to growth in fast-growing but less mature markets, with a disciplined approach to the allocation of capital.
The transaction is subject to further due diligence and agreement of final terms.  There is no certainty that a transaction will occur.

Original source: Tesco, China Resources Enterprise