Tesco Forms China Venture to Build ‘Substantial’ Business

Nov. 13 (Bloomberg) -- Tesco Plc, the U.K.’s largest retailer, said it formed the first in a series of joint ventures to build shopping centers in China as retail sales growth in the world’s most populous nation accelerates.

The retailer will build three shopping malls in northern China in Anshan, Fushan and Qinhuangdao with a Tesco hypermarket anchoring each development, the London-based company said today in a statement.

Tesco, which owns 65 large supermarkets and 6 small stores in China, said it wants to build a “substantial” business and plans to open 18 hypermarkets in the country by February. China’s retail sales and industrial production accelerated last month, bolstering forecasts for economic growth to exceed 10 percent this quarter.

“It’s going to take time because China is a massive economy,” said Jonathan Pritchard, an analyst at Oriel Securities in a telephone interview. “It’s like America, they’ll get there but it will take a while.” The company is likely to open 20 to 30 hypermarkets a year, he said.

The retailer, which was advised by HSBC Holdings Plc, formed the joint venture with HSBC Nan Fung China Real Estate Fund, Metro Holdings Ltd. and Nan Fung Group in Hong Kong, who will own 50 percent of the project.

Tesco will invest about 100 million pounds ($166 million) in the joint venture, said Tom Hoskins, a spokesman for the retailer.

Tesco rose 1.5 percent to 425 pence in London trading yesterday, boosting its gain this year to 18 percent.

China’s retail sales gained 16.2 percent from a year before in October, and urban fixed-asset investment climbed 33.1 percent in the first 10 months of this year, the statistics bureau said Nov. 11. Production rose an annual 16.1 percent, the most since March 2008.

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Colin Keatinge at ckeatinge@bloomberg.net