UK supermarket giant Tesco has announced that it has signed an agreement to acquire 50% of Chinese hypermarket chain Hymall, signalling the company's first move into China.

Tesco said it had signed the 50/50 joint venture agreement with Chinese food and beverage producer Ting Hsin, whose wholly owned subsidiary Ting Cao owns the Hymall chain of stores in China. Tesco will acquire 50% of Ting Cao's equity in Hymall for £140m (US$260m) cash. The transaction is expected to be completed within four months. 

Hymall currently operates a chain of 25 hypermarkets with plans to open up to ten more stores in the coming year. Tesco said Hymall is a profitable business with sales of £330m and profit after tax of £5.5m in 2003. Sales are forecast to be over £450m in 2004. 

The Hymall hypermarkets average 89,000 sq. ft (8,300 sq. m.) in size with most located in high quality shopping mall developments. The stores are mainly located in the east, north and northeast of China (Shanghai, Hangzhou and Ningbo in the east; Tianjin, Shenyang and Dalian in the north). 

"China is one of the largest economies in the world with tremendous forecast growth and a market we have researched extensively over the last three years," said Tesco CEO Sir Terry Leahy.

"We believe Ting Hsin is the right partner and Hymall is the right store chain for our strategic move into this exciting market. It is also a tremendous opportunity to acquire a 50% stake in an established and profitable local business with strong local management. Hymall is already a leading retailer in Shanghai, China's largest retail market and the chain of 25 hypermarkets provides an excellent base of stores from which we can grow together," Leahy added. 

UK-based Tesco already has businesses in Japan, Malaysia, South Korea, Taiwan, Thailand and several countries across Europe.