Carrefour's overseas operations take new twist

By Anita Awbi

- Last updated on GMT

Related tags Slovakia

Europe's largest retailer Carrefour has chosen a buyer for its
South Korean operations, whilst in Slovakia fresh controversy
surrounding a Tesco store-swap may jeopardise its expansion plans.

Eland Corp, a South Korean clothing manufacturer, said today it beat Samsung Tesco Homeplus, E-Mart and Lotte to acquire Carrefour Korea for KRW1.75 trillion (€1.48bn).

It was originally suggested the stores might fetch as much as €2bn if competitors were keen to build their market share in the country's €97bn grocery sector and bid aggressively.

But the 32-strong chain, currently in a discount format, will cost around KRW150-250bn to convert to a more standard supermarket format, and bidding seems to have stopped around the forecast €1.5bn mark.

Carrefour, the world's second largest retailer, confirmed earlier this month it will sell its South Korean supermarkets, following poor annual returns from the region that contributes only two per cent to the firm's global income.

The firm's discount store format failed to impress local consumers, bringing in less than two per cent year-on-year revenue growth.

It's decision to pull out echoes a similar situation in Japan last year, and indicates a global strategy focused on emerging markets rather than more mature retail environs.

It is thought the firm will redirect funds raised from the sale to China to continue a massive expansion plan, opening 28 hypermarkets in the region each year until 2008.

Meanwhile, Carrefour is still to get clearance from the Slovakian competition board for a store-swap agreement with Tesco - possibly throwing a spanner in the works for both companies' emerging markets strategy.

The Slovak monopoly commission has now extended its investigation into the deal until the end of June, according to reports in French daily Les Echos.

Tesco had originally intended to drive further into Central and Eastern Europe (CEE) by taking over 15 Carrefour stores in the Czech Republic and Slovakia as part of a global shop-swap deal agreed last autumn.

And French-owned Carrefour plans to take six Tesco stores and two sites in Taiwan for €132 million, strengthening its position in Asia.

The Taiwan deal was given the green light by the Taiwanese Trade Commission last November, but the Slovak government has been less willing to co-operate.

It has actively held back the deal, requesting the European Commission to extend its own inquiry into Tesco and Carrefour's supermarket swap. Now EU and Slovak approval must be given for the CEE arrangement.

This has fuelled speculation of a burgeoning reluctance to give global retailers free rein in new markets.

The issue has been exacerbated by suppliers in the neighbouring Czech Republic complaining to the government last year about the fees they were forced to pay retailers to get their products on the shelves, and critics suggest Tesco's expansion into the region may only confound the issue.

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