Party to a potentially important deal in Turkey's retail sector, British-owned Tesco Kipa and Turkish-owned Migros acknowledged Tuesday that they are in the midst of talks for the Turkish retailer's acquisition of the British giant's Turkey operation.
A statement by Tesco Kipa published on the Public Disclosure Platform (KAP) said that its major shareholder, Tesco Overseas Limited, is in the midst of confidential negotiations with Migros. However, the two parties have not yet agreed on the main features of the deal.
The statement released by Migros on the KAP also confirmed the negotiations.
British retailer Tesco PLC controls 95.5 percent of shares in Tesco Kipa, which has a market value of 3.2 billion Turkish liras ($1.08 billion) and total sales of TL 2.25 billion ($760 million) during the 2015 fiscal year, a two-percent increase over the previous year. The company employs around 7,000 people at 172 stores.
Tesco Kipa has failed to yield the desired growth numbers against competitors such as Migros and Carrefour since Tesco's takeover in 2003, while local discounters in Turkey such as BİM, A101 and Şok account for most of the market share.
Suffering from harsh competition against German discount retailers like Aldi and Lidl throughout Europe, the British retailer faces growing debts reaching roughly 20 billion pounds and has begun negotiations to sell overseas businesses.
Tesco backed down from a partial sale of stores to Turkish retailer Beğendik in January of this year after four months of negotiations, citing improved performance of the stores.
Total sales of Migros reached TL 9.4 billion ($3.18 billion) in 2015; however, the retailer posted a TL 370.5 million ($125 million) loss during the period due to financial expenses.
In July 2015, 40.25 percent of shares of Migros worth TL 1.86 billion ($700 million at the time) were acquired by Anadolu Group, one of Turkey's largest conglomerates operating in the automotive, banking, food, retail and energy sectors in 18 countries with over 29,000 employees. The group owns Turkey's largest brewer Efes Pilsen, holds the franchise right of McDonald's in Turkey, while operating over 1,000 small retail stores under the brand "Ekomini."
Migros Türk is the oldest retailer operating in Turkey. Founded in 1954 in a joint venture of the largest Swiss retailer Migros and the Municipality of Istanbul as market trucks serving different neighborhoods, it was later acquired by Turkey's largest conglomerate Koç Holding in 1975 and rapidly grew into the country's first supermarket chain. In 2008, Koç Holding sold its 51 percent share to BC Partners for around 2 billion TL ($750 million).
Migros currently employs 20,470 people in 1,296 stores, including 46 in Kazakhstan and Moldova.