Tesco buys bankrupt Japanese store chain
Supermarket groupTesco is boosting its fledgling Japanese operation by taking over a bankrupt chain of 27 neighbourhood stores in Tokyo.
Fre'c is a privately owned Japanese company which specialises in fresh food. It had annual sales of £146m in the year to March 2003 but debts of £53m, and is in the hands of the Industrial Revitalisation Corporation, Japan's state-backed corporate rescue organisation.
The IRC plan is to encourage Fre'c lenders to forgive the bulk of the debt, but Tesco will take on some £16m as it acquires the stores.
Tesco moved into the competitive Japanese food business last year with the £140m purchase of C-Two Network, a profitable chain of 77 Tokyo stores.
The Fre'c business will be absorbed into C-Two and funded out of that company's resources. If approved, the deal should be finalised in August.
A spokesman for Tesco said the acquisition was in line with the group's strategy of steady organic expansion and bolt-on acquisitions.
"To be pursuing a massive acquisition strategy probably wouldn't be the best way forward," he said. "Instead we prefer to learn slowly about the market and now and then, where appropriate, where there's an acquisition ... that might make sense, we may look seriously at it."
Tesco's gradual expansion has created a group with nearly half of its shopfloor space overseas. It operates in 12 countries and is profitable in 10. Last week the group revealed that total international profit grew 44% to £306m last year on sales up 29% at £7bn.
Japan has proved notoriously difficult territory for British store chains but it is a lucrative market and several of the biggest foreign food retailers have started to move in.
Wal-Mart, the world's biggest retailer, bought a small stake in Seiyu, with 400 stores, and has since built that to 38%, while Carrefour is assembling a chain of hypermarkets.
Tesco is also targeting China, where Wal-Mart, Carrefour, the German Metro chain and Makro of the Netherlands are already operating.
Tesco is said to be close to signing a deal with a joint venture partner in Shanghai.