* Tesco Kipa says in talks with various companies
* Statement follows report of possible deal with Migros
By Daren Butler and James Davey
ISTANBUL/LONDON Feb 24 Tesco, the
world's No. 3 retailer by sales, is in talks with several
companies over a possible restructuring of its struggling
business in Turkey.
The British retailer has been in Turkey since 2003 but has
suffered poor trading from its 191 stores recently, with
underlying sales at Tesco Kipa falling 10.7 percent in
its second quarter to the end of August.
Last October, Tesco said its business in eastern Turkey
could be restructured, but it would not exit the country.
Under pressure to turn around falling sales in its main
domestic market, Tesco has done deals to sort out problem
businesses in Japan, the U.S. and China and analysts have
speculated that Turkey could be next.
"Tesco is in the first stages of talks with various
companies regarding various options," Tesco Kipa said in a
statement to the Istanbul stock exchange on Monday.
It did not name any of the companies or any of the options.
A spokesman for Tesco declined to elaborate.
Kipa's statement was prompted by a Financial Times report on
Friday, citing people familiar with the situation, which said
Tesco was looking at combining its operations in Turkey with the
country's biggest food retailer Migros.
Migros is owned by private equity firm BC Partners.
"BC Partners periodically evaluates various alternatives for
all its existing investments including Migros," Migros said in a
statement to the Istanbul bourse on Monday.
Shares in Kipa jumped 9.3 percent to 4.23 lira in early
trade in Istanbul, outperforming the main share index
which was slightly higher.
Shares in Tesco were down 0.1 percent at 334.7 pence at 0933
Analysts said they saw merit in a possible Turkish joint
venture, speculating that a deal could be structured in a
similar way to Tesco's move in China, where it took a smaller
share of a bigger group.
In October, Chief Financial Officer Laurie McIlwee said the
firm had a very profitable business around Izmir on Turkey's
western coast. But he said its business in the east around
Ankara and Anatolia, where its stores are bigger and the brand
is not so well known, lacks "critical scale". He said it was
this business the firm needed to work out what to do with.
Tesco management will likely be pressed on Turkey when they
make a presentation to investors and analysts on Tuesday called
"Winning in a new era of retail".
The company is 22 months into a turnaround plan for its UK
business that has seen over 1 billion pounds ($1.7
billion)invested in store revamps, more staff, new product
ranges and pricing initiatives.
Despite that, sales at British stores open over a year,
excluding fuel and VAT sales tax, fell 2.4 percent in the six
weeks to Jan. 4.
Some analysts say Tesco may use Tuesday's event to formally
abandon its operating margin target of 5.2 percent, the highest
in the industry.