Monday, June 18, 2012

UK retailer Tesco to withdraw from Japan after 50% sale of operations to Aeon Corporation - @Reuters

Mon Jun 18, 2012 1:09pm IST

* General retailer Aeon to pay nominal fee for stake

* Tesco put Japan business on block after struggles

* Aeon looking to expansion to drive domestic growth

TOKYO, June 18 (Reuters) - British supermarket giant Tesco Plc said on Monday it will sell half of its Japanese business to the country's No.2 general retailer Aeon Corp for a nominal sum, ending an eight-year attempt to crack Japan's tough retail market.

Many foreign retailers have struggled in Japan, hampered by fickle consumer tastes, a super-competitive landscape and prolonged, profit-sapping deflation. French retailer Carrefour SA and British drugstore chain Boots are among the companies to have pulled out over the past decade.

Tesco, the world's third-largest retailer, hired Goldman Sachs last year to advise it on the sale of its Japan stores, sources said last year, after paying 32.8 billion yen for the Japanese franchise in 2003.

The British supermarket group operates 117 outlets in Japan, which are described by industry watchers as typically larger than the average convenience store but smaller than a regular supermarket, located away from heavily trafficked areas and spread out thinly over six different prefectures.

The deal will help Aeon, which trails Japan general retailer Seven & I Holdings in terms of market value, expand its reach in its home market as it tries to drive growth.

Prior to the Tesco deal, Aeon had spent more than $775 million over the last five years, according to Thomson Reuters data, including taking stakes in Japanese supermarket chains like Maruetsu and Marunaka.

Aeon shares settled 0.6 percent higher before the announcement, underperforming a 1.8 percent rise in the benchmark Nikkei 225.