Tesco raises Eastern profile in £180m deal

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The Independent Online

Tesco has bolstered its position in China by taking almost full control of the Hymall supermarket joint venture it signed up to two years ago.

The £180m deal, which increases Tesco's 50 per cent stake to 90 per cent, comes a week after the company doubled its space in Malaysia and announced plans to open 300 new international stores.

Tesco's chief executive, Sir Terry Leahy, said the agreement with its partner company Ting Hsin would enable Tesco to speed up its expansion plans in the country. "We have seen exciting growth in China since announcing the joint venture two years ago and are looking forward to the partnership entering a new phase," he said. "Ting Hsin continues to be a large shareholder in the business. They are a valued supplier of food products and we benefit from their unrivalled local knowledge as we grow the Hymall business together."

Since Tesco bought its first stake in 2004, the business has grown from 25 stores - mostly in the stretch of the Yangtze delta near Shanghai - to 44. Its first store in Beijing will open in January and it will be the first to carry the Tesco name alongside its Happy Shopper logo that is blazoned across other shops. The store will have about 10,000 sq metres of floor space and 500 staff. Tesco said it expects to continue to open about 10 stores a year.

The group still has a fair way to go to catch up with its international competitors, including France's Carrefour and the US giant Wal-Mart. Both have been marketing under their own names for several years and are recognisable brands in China. In September, Tesco announced it would introduce 500 products under its own name in a move that should bring it brand recognition.

Its shares rose 1 per cent yesterday and analysts welcomed the deal, which comes after a breakdown in talks with India's Bharti Enterprises. Andrew Wade, at Seymour Pierce, said: "Despite the short-term cost we see the move as positive, given the importance of the Chinese market.

"The increased stake should give Tesco greater control over the joint venture, while retaining the expertise of the local partner."

Philip Dorgan, at Panmure Gordon, added: "This, together with other deals - and growth - announced over the last six months, means we now look for sales of around £110bn in 2016 compared with our original forecast of £100bn."