UK Markets closed

Sun Sets On Tesco's Foray Into Japan Market

(c) Sky News 2012

Tesco (LSE: TSCO.L - news) has struck a deal to end its nine-year attempt to crack the Japanese market - nearly a year after signalling the exit.

Britain's biggest retailer has reached an agreement to sell half of its Japanese
business to Japan (EUREX: FMJP.EX - news) 's Aeon (Kuala Lumpur: 6599.KL - news) for a nominal amount.

It currently operates 117 outlets in the country, which are described by industry watchers as typically larger than the average convenience store but smaller than a regular supermarket.

Many foreign retailers have struggled in Japan, hampered by fickle consumer tastes, strong competition and prolonged deflation.

Pharmacy chain Boots has been among other retailers to have left Japan in the past decade.

Tesco hired Goldman Sachs (NYSE: GS - news) last year to advise it on the sale of its Japanese stores, after paying £155m for the franchise in 2003.

In a statement, Tesco said it would exit Japan in two stages - first by selling 50% of its shares in Tesco Japan to Aeon.

It then planned to invest about £40m in the Japanese business to finance further restructuring, which would result in it having no further financial exposure to the company.

Tesco's chief executive Philip Clarke said: "I thank our colleagues in Japan, who have done an excellent job for the business - in particular over recent months.

"We are very pleased to announce this deal with Aeon today and are confident that this will deliver the best outcome for our staff, for our customers in Japan and for our shareholders."