Tesco exits China with sale of its joint venture for £275m

Tesco has announced the sale of its 20% stake in Gain Land, its Chinese joint venture, for £275 million, marking its exit from China.

The UK retailer has divested its share of the company to a subsidiary of its joint venture partner, China Resources Holdings (CRH).

According to Tesco, the disposal allows the retailer to further simplify and focus the business on its core operations. Tesco added that it will use the capital for general corporate purposes.

The formation of Gain Land between Tesco and CRH was completed in 2014.

During this time, Tesco said that the joint venture would combine its retail practices, international sourcing and multi-channel capabilities with CRH’s strong local knowledge and brand to create the largest food retailer in China.

As part of the deal, Tesco combined its 131 stores in China with almost 3,000 CRH stores, according to a report by Reuters.

According to a report by Reuters, Tesco signalled in December a review of its remaining Asian businesses. 

In a statement published on 8 December 2019, Tesco said: “Tesco PLC (“Tesco”) confirms that, following inbound interest, it has commenced a review of the strategic options for its businesses in Thailand and Malaysia, including an evaluation of a possible sale of these businesses.

“The evaluation of strategic options is at an early stage, no decisions concerning the future of Tesco Thailand or Malaysia have been taken, and there can be no assurance that any transaction will be concluded. A further announcement will be made if and when appropriate.”

In its report, Reuters also referred to the retailer’s exit from Japan and the US, and the sale of its Korean business over the last ten years. 

“If Tesco does quit Thailand and Malaysia, its only overseas operations, apart from Ireland, will be its central European division, consisting of stores in the Czech Republic, Hungary, Poland and Slovakia,” according to Reuters.

The transaction is scheduled to be completed on 28 February 2020 with no closing conditions or regulatory approvals required.

In October last year, Tesco announced that its group CEO Dave Lewis will be stepping down from his role in summer 2020. Lewis will be succeeded by the former Walgreens Boots Alliance executive Ken Murphy.