Tesco leaves Japan with tail between legs

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LONDON (ShareCast) - Tesco (LSE: TSCO.L - news) has clarified how it will get rid of its underperforming Japanese business as it battles to resume top-line growth in the UK.

Tesco entered Japan in 2003 through the acquisition of C2 Network, which ran stores under the Tsurakame brand. The business currently comprises 117 small stores, primarily under the Tsurakame, Tesco and Tesco Express brands in the greater Tokyo area.

Tesco announced its decision to sell the business in 2011 but the situation has been made more urgent by the retail giant's recent profit warnings.

The exit will be in two stages process. In the first phase Tesco will sell 50% of its shares to Japan's largest retailer, Aeon, for a nominal sum.

This will result in the formation of a joint venture with Aeon. As part of this, Tesco will invest a further £40m to finance restructuring, after which Tesco will have no further financial exposure to the Japanese business or its operations. Tesco shares have tanked 25% so far in 2012.

BS