Wal-Mart buys China grocery chain
The $1-billion deal, would make it the county's biggest food market.
By TIMES WIRES
Published October 17, 2006
NEW YORK - Wal-Mart Stores Inc. will spend about $1-billion in China to buy a chain of 100 stores in a deal that could vault it ahead of competitors to become the biggest food and department store network in China.
The deal was made public by the Wall Street Journal, which cited people familiar with the transaction. A spokeswoman for Bentonville, Ark.-based Wal-Mart declined to comment Monday.
The deal for the Chinese markets of Trust-Mart, a closely held Taiwanese company, comes as foreign retailers look to tap China's fast-growing economy, large population and expanding middle class.
If it is approved by Chinese regulators, the transaction would vault Wal-Mart past its arch rival, Carrefour SA of France, in number of outlets in China. Wal-Mart beat out Carrefour for the Trust-Mart purchase, according to people involved in the deal.
Wal-Mart currently has 66 stores in China and has said it plans to increase in size fivefold in the next five years.
The transaction is structured to take place in phases. Wal-Mart will acquire 31 stores initially, the newspaper reported. Then, over the next three years, Wal-Mart will acquire the remainder of Trust-Mart's 100 stores as each outlet meets various criteria, including compliance with fire codes.
Details of the payment weren't disclosed.
Wal-Mart's planned acquisition comes after the company's sale of its German stores in July at a loss of $1-billion and its exit from South Korea in May.
The world's largest retailer is counting on international growth to counteract slowing U.S. sales and wants to generate 33 percent of its revenue and profit overseas, up from 20 percent currently.
"This will give them more scale in a market that is going to be increasingly more important for them," said Patricia Edwards, a Seattle-based money manager at Wentworth, Hauser & Violich, with $8.2-billion in assets including Wal-Mart shares.
Last month Wal-Mart introduced a credit card with Bank of Communications Ltd. in China.
Trust-Mart, founded in 1997, expanded to more than 100 stores including franchisees in more than 20 provinces in China, the company said on its Web site.
It has more than 30,000 employees selling about 20,000 items.
Competition in China's $841-billion retail market has intensified after the Chinese government dropped restrictions on foreign retailers to meet World Trade Organization pledges.