LONDON (FNS) -- Tesco is in talks to acquire a 45% stake in Hungarian food retailer Global TH for $18 million (12 million pounds).
ng for several years.
Global operates 43 stores in northwest Hungary with a total selling area of about 100,000 square feet, Tesco said. The stores are centered in a region about 50 miles west of Budapest, said a spokesman for Tesco, based in Cheshunt, England.
Global had pretax profits of about $1.5 million (at an exchange rate of $1.50 to the pound) and sales of $37.5 million in the year ended Dec. 31. Its assets totaled about $12 million at that time, Tesco said.
Tesco has been advising Global for the past two years on such issues as store layout and merchandising, the spokesman said. The expected investment is aimed at strengthening its ties with the Hungarian company.
The Hungarian food retail market is dominated by regional chains, many of which remain state-owned. Tengelmann of Germany and Julius Meinl of Austria are two other Western European retailers that have invested in chains in Hungary.
John Gildersleeve, trading director at Tesco, said Hungary, although one of the smaller countries in Eastern Europe, appears to have developed further toward a market economy.
Global is planning a flotation on the Budapest Stock Exchange in mid-April as part of the Hungarian government's privatization program. Tesco will subscribe for shares in Global as part of this capital-raising exercise and its investment would give it about 45% of Global's shares.
Gildersleeve would join the Global board.
The money raised would enable Global to increase its store development program and to develop larger stores of about 20,000 square feet, the spokesman said.