Tesco mulls joining in $3bn Hong Kong bid tie-up

UK grocer could team up with CRE to buy leading supermarket chain

Tesco is talks to take over Hong Kong's leading supermarket chain ParknShop with its Chinese partner, China Resources Enterprise (CRE).

Hutchison Whampoa, the Hong Kong conglomerate headed by the billionaire Li Ka-shing, is seeking $3bn-$4bn (£1.9bn-£2.5bn) for the ParknShop chain. The talks comes after the UK grocer earlier this month unveiled a "memorandum of understanding" to merge its Chinese business with the state-backed retailer CRE, which could see the Tesco brand disappear from its 131 stores on the mainland.

The Chinese retail and beer conglomerate said it had already spoken with Tesco about bidding for ParknShop, a deal which would make it the biggest supermarket chain in the former British colony.

Frank Lai, the finance director at CRE, said yesterday: "We will consider to bid with Tesco; it's one of the discussions we have with them."

He added the acquisition could help CRE "increase market share, improve efficiency and achieve economy of scale" in Hong Kong but it could face competition rivals.

ParknShop is understood to have received bids from eight operators, including the world's biggest retailer Walmart, Lotte and Aeon.

ParknShop is the second-largest player in Hong Kong's $6.6bn (£4.2bn) grocery sector with a 33 per cent share, behind the market leader Wellcome with 40 per cent.

Mr Lai added that ParknShop was a "quality asset" but declined to say how much he thought it might be worth.

Tesco's attempt to merge with CRE, which has 2,986 Vanguard stores in China, was an admission that it would be better to find a partner than go it alone in China.

The combined retail group would have revenue of £10bn, although it may take months for the deal to complete. The British grocer said the potential deal was consistent with a more "disciplined approach to the allocation of capital".

Under the proposed joint venture, Tesco is expected to have a stake of 20 per cent, while CRE would have 80 per cent.

Although Tesco will provide CRE with logistics and supply-chain expertise under the proposed deal, it will have to pay hundreds of millions of pounds to join forces with its much-bigger Chinese rival.

Tesco launched in China in 2004 via a joint venture with a local chain, Hymall, and then acquired a further 40 per cent of the venture two years later.

However, its underlying sales fell by 1.1 per cent in the country last year and Tesco said in April that it had "adopted a more cautious stance in China".

It has been pulling back on its expansion there since it unveiled plans in 2010 to build 80 large shopping malls, anchored by a Tesco, over a five year period.

On home soil, Tesco is investing heavily to turn around its lacklustre performance in the UK.

Its domestic like-for-like sales fell by 1 per cent in the 13 weeks leading to May 25, partly driven by falling demand for consumer electronics, such as big televisions.

Checking out of foreign ventures

Tesco made its first foray outside the UK and Republic of Ireland in 1995, when Britain's biggest supermarket entered Hungary by acquiring the local retailer S-Market's 26 stores.

Under its former chief executive, Sir Terry Leahy, Tesco went on a land-grab offensive from the late 1990s that eventually saw it open in 13 countries outside the UK to give it eye-watering revenue of £72.4bn last year. But in recent years, Tesco has retreated from key markets with its tail between its legs.

The supermarket, which is led by Philip Clarke, decided to exit Japan in 2011 and this year said that it was throwing in the towel on its failed US venture, Fresh & Easy.

Following a £1bn writedown on Fresh & Easy's assets, the group also said it was seeking the safe arms of a bigger rival in China this month.

James Thompson

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Life and Style
life
News
news

The party's potential nominations read like a high school race for student body president

Voices
A mother and her child
voices
Voices
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
Arts and Entertainment
Cold case: Aaron McCusker and Christopher Eccleston in ‘Fortitude’
tvReview: Sky Atlantic's ambitious new series Fortitude has begun with a feature-length special
Voices
Three people wearing masks depicting Ed Miliband, David Cameron and Nick Clegg
voicesPolitics is in the gutter – but there is an alternative, says Nigel Farage
ebooks
ebooksA special investigation by Andy McSmith
News
i100
News
people
Sport
Chelsea manager Jose Mourinho
footballI have never seen the point of lambasting the fourth official, writes Paul Scholes
Life and Style
Vote green: Benoit Berenger at The Duke of Cambridge in London's Islington
food + drinkBanishes thoughts of soggy school dinners and turn over a new leaf
News
Joel Grey (left) poses next to a poster featuring his character in the film
peopleActor Joel Grey comes out at 82
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee