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Tuesday, November 9, 2010

TESCO LOOKS EXPAND IN ASIA BY BUYING CARREFOUR SUPERMARKETS


Britain's biggest supermarket among handful of retailers bidding
for 61 Asian stores put up for sale by French group


Tesco is in advanced discussions to buy 61 stores in south-east Asia from France's Carrefour supermarket chain for about $1bn (£620m).
Britain's biggest supermarket is understood to be among a handful of suitors to submit "second-round" bids for the Carrefour stores in Malaysia, Singapore and Thailand as it seeks to boost its presence in the fast-growing Asian markets.
Acquiring Carrefour's stores would significantly expand Tesco's Asian operations, which include outlets in Thailand, South Korea, China, Japan and Malaysia. Tesco's biggest Asian market is South Korea, with sales of £4.2bn last year.
The acquisition would follow Tesco's takeover of other Asian retailers, such as its £958m purchase of South Korea's Homever discount chain in 2008 and of Japan's C Two Network discount retailer.


Tesco, which would not comment on the auction, is said to be the favourite to secure the stores because it is the world's third-biggest supermarket chain and already has a strong presence in Malaysia and Thailand. The retailer's deep pockets give it the firepower, while the scope for cost-cutting through mergers with its local operations could justify a higher price than its competitors are likely to be able to afford, analysts said.
Sir Terry Leahy, Tesco's outgoing chief executive, has publicly stated that it "makes sense" to buy the stores, adding that "it depends on price always".
Carrefour is selling 40 stores in Thailand, 19 in Malaysia and two in Singapore. Some bidders are thought to be making offers for different combinations of these stores, although Tesco is understood to be interested in all the outlets.
Carrefour is selling the stores after deciding to redeploy resources into markets it believes that it can lead. However, it is not leaving Asia altogether. Carrefour will keep its outlets in China, which make up about 70% of its sales in the continent, as well as in Indonesia.
Tesco's pursuit of the Asian market comes as the retailer continues to underperform the UK grocery market, according to Kantar Worldpanel. The supermarket increased sales by 4% in the 12 weeks to 5  September, compared with a 4.3% rise in the overall UK market, it said.
Tesco shares fell 3.25p (0.7%) to close at 416.40p.

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