Tesco has signed a new joint venture to create three more Lifespace malls in China, an initiative welcomed by the City as evidence of building momentum in the country.
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The 50:50 enterprise between Tesco and a consortium of Asian investors including Singapore’s Metro Holdings, will enable the opening of three malls in Shenyang, Xiamen and Fuzhou, each with a Tesco hypermarket as anchor tenant. Tesco already operates four Lifespace malls and 93 hypermarkets in China.
Each will invest about £30m of equity, and the total value of the project is about £170m, with debt being provided by banks including the Industrial and Commercial Bank of China, and Standard Chartered Bank.
Shore Capital analyst Clive Black said it is a “modest” financial deal in the context of the global Tesco group, but added: “In terms of the Chinese operations it is a more material step forward as Tesco seeks to build momentum into a business from which it anticipates modest near-term profitability but long-term financial gains and rewards.”
He said: “We are heartened by the high quality of the partners with which Tesco is associated in Asia.”
Tesco has said previously that it wants a portfolio of 50 Lifespace malls by 2015.
Seymour Pierce analyst Kate Calvert said: “We view this as a logical move as it reduces the upfront capital commitment of its shopping centre development plans in China.”
Read more about Tesco in this week’s big story about new chief executive Phil Clarke taking the grocer forward