Tesco sells stake in Chinese joint venture to its partner for US$375m

CHINA – British retailer, Tesco PLC has sold its 20% stake in Gain Land to a subsidiary of its joint venture partner, China Resources Holdings for £275 million (US$375m).

Gain Land is the Chinese joint venture with CRH that was established in 2014 after combining the British group’s 131 stores in China with its almost 3,000 stores that CRH operated at the time.

Tesco said that the disposal will allow the retailer to further simplify and focus the business on its core operations adding that the proceeds of the transaction will be used for general corporate purposes.

The sale, which is expected to be complete by 28 February 2020, marks the exit of Tesco in the Asian Country after years of struggling to entice Chinese consumers through its doors.

After costly exits from Japan and the United States and the sale of its South Korean business, Tesco signalled in December a further retreat from its once lofty global ambitions by starting a review of its operations in Thailand and Malaysia, including an evaluation of a possible sale of these businesses.

A sale of its operations in Thailand and Malaysia would imply that the London-based retail giant will only run overseas operations in Czech Republic, Hungary, Poland and Slovakia as well as Ireland.

However, Tesco noted that the evaluation of strategic options in Thailand and Malaysia is at an early stage adding that no decisions concerning the future of the business in the two countries had been taken.

While the retailer did not give any assurance that any transaction will be concluded, the it did not that; “further announcement will be made if and when appropriate.”

With Tesco being among the top five largest retailers globally, the retreats further signal a continuation of the dramatic transformation in the retail industry over past few years.

Looking back to 2019, there was stability in the positioning of the top five retailers and a few notable bankruptcies according to a recent report from Deloitte – which describes the twelve months period as a year in transition.

But when it comes to how 2020 will play out, uncertainty is the name of the game. It is projected that the overall economy might be losing its shine in 2020, presents retailers an opportunity to review their playbook for riding out a downturn.

With a possible recession and potential fallout from tariff tensions looming, Deloitte warns that retailers should have a strategic plan that can handle adjustments when and as needed.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.