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Wed, Oct 18, 2006 - Page 10 News List

Wal-Mart plans to purchase Trust-Mart

BIG INVESTMENT If the deal receives regulatory approval, the US retail giant will overtake French rival Carrefour in the number of hypermarkets it controls in China


Wal-Mart Stores Inc, stymied this month in its attempt to expand in Japan, plans to invest US$1 billion in China by buying Trust-Mart (好又多量販), doubling its number of stores in the country's US$841 billion retail market.

The deal needs regulatory approval and may not be announced for weeks, said a person familiar with the proposed acquisition yesterday, who declined to be identified before an announcement. Trust-Mart spokesman Huang Shiying confirmed it's in talks with Wal-Mart and other overseas companies. No buyer or price has been decided for the grocery and appliance provider, he said.

If the deal is approved by Chinese regulators, the transaction would vault Wal-Mart past its archrival, Carrefour SA of France, in the number of hypermarkets in China. Wal-Mart beat out Carrefour for the Trust-Mart purchase, according to people involved in the deal.

The deal for the Chinese hypermarkets 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. It also follows Wal-Mart's recent exit from both Germany and South Korea, and as Japan's Aeon Co beat Wal-Mart to win exclusive rights to buy supermarket operator Daiei Inc this month.

"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 US$8.2 billion in assets including Wal-Mart shares.

Wal-Mart initially will purchase 31 stores from Trust-Mart, which controls more than 100 shops, and gradually increase its holdings, according to the Wall Street Journal, which reported the deal earlier on Monday. That would give it a bigger foothold in China than French rival Carrefour SA.

The Bentonville, Arkansas-based company already runs more than 60 stores in China and has said it plans to open 20 more this year. Wal-Mart spokeswoman Beth Keck declined to comment.

Trust-Mart, founded in 1997, has 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, including groceries, home appliances, clothing and food, in stores with total space in excess of 400,000m3.

A unit of Taiwan's Chengda Group (誠達集團), Trust-Mart had sales of 13.5 billion yuan (US$1.7 billion) last year and net income of "less than 1 percent" of revenue, spokesman Huang said yesterday.

Winston Wong (王文洋), son of the founder of Formosa Plastics Group (台塑) and previously an honorary board member of Trust-Mart, has severed ties with the company, Huang said.

"It's true we have been in touch with Wal-Mart and we've sent our senior managers to its US headquarters to learn from the company," said He Delai, assistant to Trust-Mart President Yu Yuejiang (於曰江), in a telephone interview yesterday. "We will introduce Wal-Mart's computer system to improve our management."

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