Noting recent media speculation, Tesco and China Resources Enterprise (CRE) today announced that they have entered into a Memorandum of Understanding to combine their Chinese retail operations to form the leading multi-format retailer in China.
The proposed joint venture would create a business with sales of some £10bn, in which CRE and Tesco’s effective interests are expected to be 80% and 20% respectively.
CRE would combine its CR Vanguard business, which operates 2,986 stores across China and Hong Kong, with Tesco China’s 131 stores and shopping mall business.
Tesco said the partnership would bring together “CRE’s deep understanding of local customers, established nationwide infrastructure and proven track record as a partner with Tesco’s global retail expertise, international sourcing scale and supply chain capabilities”.
The supermarket chain said that the move is consistent with its 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 transaction is subject to further due diligence and agreement of final terms.