Tesco takes control of Thai hypermarkets

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The Independent Online
TESCO stepped up its international expansion yesterday when it paid pounds 111m for a controlling stake in one of Thailand's leading hypermarket chains. The deal with Lotus, which has 13 hypermarkets across Thailand, will also see Tesco take on the group's pounds 89m debts.

Tesco's deputy chairman, David Reid, said the economic turmoil in the region had created the opportunity and that stores like Lotus would not have been available under "normal" economic conditions.

"It is not a fire sale but consumer demand has fallen in Thailand by around 15-20 per cent over the year so it has done well to survive."

Mr Reid said Tesco planned to double the number of Lotus stores and to triple its sales over the next four years.

"What Tesco is really trying to do here in terms of strategy is to give itself access to growth markets for the future," he said.

Tesco is already number one in the UK and Ireland and has a growing business in central Europe.

"What Terry Leahy [Tesco's chief executive] is saying is `we've got to be more global'. He wants us to benchmark ourselves, not just against Sainsbury's, but against Wal-Mart, Carrefour and so on. We've got to have formats that can stand up to these people and be areas that give us access to growth."

Mr Reid declined to comment on Asda's failed merger talks with Kingfisher, but said the UK market was clearly consolidating.

He said Tesco was viewing the possibility of becoming a pan-European food retailer with interest. "If that starts to happen we will have too re-appraise our position. It is a question of who would want to be first."

Under the deal Tesco will buy a controlling stake in Lotus from CP Group for pounds 111m. Lotus was only set up four years ago and last year recorded losses of pounds 2m on sales of pounds 202m.

Tesco is one of a growing number of UK stores branching out internationally. Boots opened six trial stores in Thailand last year and last week stepped up expansion with plans for 40 more shops. Kingfisher is expanding in Taiwan with B&Q.

Mr Leahy was paid a total of pounds 789,000 last year, up from pounds 765,000. Andrew Higginson, the new finance director was paid a joining fee of pounds 170,000 when he arrived from Burton in November.