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The Haney Group Advise Clients On Tesco Joint Venture

By Author: David Roberts
Total Articles: 13

The Haney Group a boutique equity research and management firm based in Hong Kong founded by a diverse private wealth consortium of financial professionals, with a combined knowledge of the stock markets, tax legislation, legal compliance and market analysis. Priding themselves in giving the very best service to their institutional investors, high net worth individuals and private investors today commented on future dealings of Tesco Plc, reportedly in last round negotiations with China’s second largest retailer with a view to establish a joint venture operating retail hypermarkets in the China.

Retail industry analysts indicate that the joint venture with China Resource Enterprise Ltd, the owners of the Vanguard chain of retailers is completed that the resultant company will be the largest of its type in China. The new undertaking falls into Tesco’s new strategy of concentrating on new profitable directions that lead to growth in fast-growing but less mature markets, with a disciplined approach to the allocation of capital.

Tesco and C.R.E are able to expect an alliance that will benefit both in new undertakings in regards to future operations within China, Hong Kong and Macau. Tesco has been slowly extricating itself from direct involvement in international trading after a nearly twenty year aggressive expansion primarily in Asia and Europe. A partnership of this type with C.R.E will allow Tesco to scale down the size of its offshore operations without sacrificing its share of the massive Chinese retail sector, while giving C.R.E access to Tesco’s well-established international supply chain infrastructure.

“It’s a very attractive arrangement for both parties as they stand not just to gain in the short-term but also the long-term as retailers expand further throughout Asia. It fits well with the long-term business strategy for Tesco of drawing back on direct operations and giving C.R.E a clearly defined path for their own international expansion. For a Chinese retailer this is one of the biggest obstacles to overcome and the partnership will ensure the best growth is achieved with a wide array of accessible goods that may not have been available,” said David Roberts, the Senior Vice President of Mergers and Acquisitions at The Haney Group.

It is expected that Tesco, which operates 131 stores with sales of about £1.5 billion per year in China and holds significant stakes in many shopping malls where they are the principle tenant, will pay the Vanguard chain owners a non-disclosed sum of money to retain a 20% share of the combined company operations. The Vanguard chain already owns over 4000 stores in China, with the combined company’s holdings possibly making it China’s largest retailer property wise. Both C.R.E and Tesco’s shares have performed consistently well over the last twelve months and news of the potential joint venture saw the markets react optimistically with both companies stock recording gains.

“It’s hard to fault the thinking on this venture as both companies stand to profit from this arrangement over the long term. They both want and need what the other party is bringing to the table and the savings to both are clear. To have a new partnership so well set up in the international market and the Chinese domestic retail sector is obviously very attractive to potential investors. With the strong long term performances of both parent companies, this is a situation we are going to be tracking diligently on behalf of our clients,” concluded David Roberts, the Senior Vice President of Mergers and Acquisitions at The Haney Group.

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