Speculation mounts over sale of Chinese retailer

By Anita Awbi

- Last updated on GMT

Related tags Carrefour Retailing

Foreign retailers eyeing China may be tempted by the alleged sale
of Trust-mart, the country's largest foreign-owned retailer, but
with a $2 billion price tag only global leaders need apply.

According to speculators, Taiwan's privately-owned Trust-mart is pulling out of the Chinese market, reportedly asking UBS investment bank to advise on the sale of its 100 stores.

The speculators believe a foreign buyer may have already been found but UBS will not comment and Trust-mart officials refused to confirm the news.

A Trust-mart spokesperson told Shanghai Securities News: "Reports of us preparing to sell out to competitors are completely groundless.

"We are preparing to go public. Why would we want to sell out at this time?"

But industry observers have hinted that a deal may be imminent.

Trust-mart operates in 20 provinces with yearly sales reportedly in excess of $1 billion - presenting an ambitious opportunity for any investor.

It currently competes with French-owned Carrefour, German Metro Group and Tesco in the $240bn blossoming Chinese food retail sector.

Senior international business analyst Fiona McTavish, from market research group IGD, said: "The acquisition of Trust-mart would provide a huge opportunity, as the retailer operates 100 stores, offering food and household products, across 20 Chinese provinces.

"The Chinese economy has been growing strongly since the early 1980s, and is forecast to grow by 8 per cent every year until 2010, making it extremely attractive for foreign investment."

Since 2004's relaxation of trading laws, allowing foreign investors to buy 100 per cent stakes in local firms, many international retailers have moved in.

Late last year Carrefour cemented its status as the leading hypermarket retailer by acquiring 100 per cent of its Chinese joint venture, Kunming Carrefour Supermarket, and garnering a $1.72bn market share of sales.

The group now plans to open 12-15 hypermarkets every year and to operate 600 discount stores by 2007.

And Tesco, the world's fourth largest food retailer, currently holds a 50 per cent share in Hymall, jointly operating 50 Chinese hypermarkets in Shanghai and neighbouring regions.

It has ruled out interest in Trust-mart, opting to follow a slow-and-steady approach instead.

A Tesco spokesperson said of its tactics in China: "Our strategy has been always about taking a local approach and being cautious."

According to IGD, domestic retailers still dominate the market. The Bailian Group has the largest market share, operating over 4,300 stores, leaving foreign retailers trailing far behind.

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