Major British retailer Tesco PLC announced Tuesday it will acquire Tokyo-based supermarket chain C Two-Network Co. for 32.8 billion yen, joining the growing list of foreign retail giants gaining a foothold in the world’s second-largest economy.
For Tesco, the acquisition allows a foray into “an exciting but complex and challenging market,” Andrew Higginson, Tesco’s financial director, told a news conference in Tokyo.
Britain’s largest food retailer said it would carry out a 30-day tender offer starting Wednesday to buy all outstanding shares in C Two-Network, whose management decided to endorse the takeover bid.
C Two-Network operates 78 food stores, mainly in Tokyo. Under the terms of the deal, Tesco will offer 3,400 yen in cash for each share in the firm, which is listed on the first section of the Tokyo Stock Exchange. The price represents a premium of 35 percent over the average daily close for the past three months, according to Tesco officials.
“While we have achieved growth by our own for the past years, we have been searching for the best partner at the same time,” said Yasushi Inaida, chief executive of C Two-Network. “We judged that the deal is very attractive and fair, and also profitable for our shareholders.”
Inaida said acquisition talks between the two firms started late last year. Higginson said Tesco has been looking for possible beachhead in Japan for the last three years.
Tesco, with 28.6 billion euros — some 5.4 trillion yen — in group sales for the year that ended in February 2003, operates 2,291 stores in 10 countries, including South Korea.
Tesco officials emphasized the British retailer will respect the local operator’s way of doing business.
They said they have no plans to change the store’s brand names in Japan, which include Tsurukame. Inaida and other executives of C Two-Network will remain in their current posts, with two or three officials from Tesco expected to join its board.
However, the British giant’s plans for its latest acquisition remain unclear.
“We deliberately did not set too many expectations,” Higginson said. “Changes are very subtle.”
The acquisition of C Two-Network, with annual sales of 54.3 billion yen, pales in comparison with Wal-Mart Sores Inc.’s takeover of Seiyu Ltd., which has 1.14 trillion yen in annual revenue.
But C Two-Network boasts solid performance thanks to unique merchandising and low-cost operations at a time the domestic retail sector is suffering amid the economic slump.
Seiichiro Samejima, a senior investment analyst at Ichiyoshi Research Institute Inc., said Tesco probably chose C Two-Network because of its background as a wholesaler, with its wealth of information on suppliers.
“What’s most difficult for foreign entrants like (French retailer) Carrefour is (to get good deal with) the domestic suppliers,” he said. “So, C Two-Network’s origin as a wholesaler may look very attractive to Tesco.”
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