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.