UK supermarket giant Tesco to sell half of Japanese chain to Aeon Corp

British supermarket giant Tesco Plc is selling half of its Japanese business to the country's No.2 general retailer Aeon Corp, eight years after it failed to make any headway in Japan's tough retail market.

Tesco, the world's third-biggest retailer will soon join French retailer Carrefour and UK chemists Boots in pulling out of the Japanese market.

While Carrefour and Boots have already abandoned their Japanese operations, the world's largest retailer Wal-Mart of the US is having a difficult time with its Seiyu subsidiary and has stopped investing in it, fuelling speculation of an eventual exit.

Philip Clarke, CEO of Tesco, 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."

Tesco said that it would exit Japan in a two-stage process.  In the first phase Tesco will sell 50 per cent of its shares in Tesco Japan to 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 £40 million as a joint venture partner to finance further restructuring, after which Tesco will have no further financial exposure to the Japanese business or its operations.

Japan is the smallest of Tesco's 13 international businesses, consisting of 117  small stores in the Greater Tokyo area,  employing  around 3,900 people and making less than £500 million ($813.8 million) in annual sales.