Wal-Mart Stores Inc, the world's biggest retailer, struck a $1 billion deal to take over a Chinese rival by 2010, challenging Carrefour as the largest operator of super-centres in booming China.
Bentonville, Arkansas-based Wal-Mart said it bought 35 percent of Bounteous Co Ltd, a deal that could trigger consolidation in China's ferociously competitive $1 trillion retail market. Under terms of the deal, Wal-Mart said it would buy control of the Taiwan-based chain by 2010 if conditions were met.
Financial terms were not disclosed, but a source familiar with the situation said Wal-Mart would eventually pay a total of $1 billion for all of Bounteous, which operates 101 hypermarkets in 34 Chinese cities under the Trust-Mart brand.
Sources said that while Trust-Mart is loss-making, Wal-Mart was attracted to its large-scale, well-located sites, which are hard to come by in crowded Chinese cities.
"It's really difficult to find good locations," said Tai Fook Research analyst Ophelia Tam. Wal-Mart already operates 73 stores in China and employs more than 37,000 people there. France-based Carrefour, the world's No 2 retailer and the largest foreign operator in China, added 20 China stores last year to bring its total in the country to 90 by the year-end.
"It's all about tiering and market share. Wal-Mart has a history of buying local operators, and this could make them No 1 in China," said an analyst at a European investment bank. Other players include Germany's Metro AG, Britain's Tesco Plc and local operators such as Wumart Wal-Mart's China expansion follows exits last year from its operations in Germany and South Korea.
The company is also close to striking a joint venture with Bharti Enterprises to enter India, a fragmented retail market that restricts foreign operators. In a statement, Wal-Mart Vice Chairman Michael Duke called the China investment "an important step in bringing our additional scale to our China retail business".
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