Tesco has announced that it has gained control of Kipa, a small Turkish hypermarket chain by acquiring the necessary majorities of the unlisted public shares in the company.
Tesco first signalled that it was in talks with Kipa in back in August 2002, but had been in discussions to finalise the terms and conditions of the agreement ever since.
The deal, which involves purchasing the majority of the Turkish retailer's unlisted A and listed B shares, means that Tesco is now present in ten different international markets. Some years ago the retailer made the pioneering strategy of focusing on Central and Eastern Europe for its international expansion plans - a strategy that has now begun to pay off.
However its ambitions in the Czech Republic have recently been set back after a property developer brought a court order against the retailer demanding that he be compensated over a land deal involving a Tesco property.
As well as Czech Republic and Turkey, Tesco now has operations in Hungary, Poland and Slovakia in Central and Eastern Europe. In Asia it now has operations in Thailand, Malaysia, Japan, South Korea and it recently relocated some UK business operations to Bangalore, India.
The equity capital cost of 100 per cent of Kipa is valued at £75 million debt free (€107.6m), plus an additional payment in return for cash acquired on the balance sheet on closing. Tesco has also stressed that the transaction will be cash deal. The retailer will be making a tender offer for the outstanding B shares as required by Turkish law.
Kipa operates five hypermarkets in the Aegean region with reported sales in 2002 of £124 million pre tax profit of £4.7 million and has over 1,500 employees.
Currently Turkey has a growing population of 70 million which contains what analysts describe as an underdeveloped retail market. In 2002 it had real GDP growth of 7.8 per cent and is working towards EU accession in 2004, which will bring further economic benefits.
In recent years a number of the leading supermarket chains have been investigating the huge potential of the Turkish market, with both Carrefour and Metro setting up operations there.
Terry Leahy, Tesco chief executive, said: "The acquisition of Kipa is an important step in our international strategy for long term growth. It is a great opportunity and an ideal entry vehicle: Kipa has a small and profitable chain of hypermarkets operating in a growing market. We will be working with existing management and three of the current Kipa directors to serve Turkish customers even better."