Freshfields Bruckhaus Deringer and Reed Smith Richards Butler are advising Tesco and China Resources Enterprise (CRE) as the companies look to launch a joint venture for the operation of retail stores in Greater China.

CRE has announced it is mulling a tie up with the UK supermarket chain to create a new entity which would be 80% controlled by CRE and 20% by Tesco.

Under the terms, the two companies would combine China Resources' 2,986 stores located across the PRC and Hong Kong, known as Vanguard, with Tesco's 131 stores in China, as well as its Chinese shopping mall business.

In a statement the company said the partnership would bring together CRE's "deep understanding of local customers, established nationwide infrastructure and proven track record", with Tesco's "global retail expertise, international sourcing scale and supply chain capabilities". 

Acting for Tesco on the proposed joint venture is magic circle firm Freshfields Bruckhaus Deringer, which has fielded teams in London and Hong Kong. Overseeing the London team is the firm's main client relationship partner Claire Wills, who is head of Freshfields' retail sector group. 

Representing CRE is Reed Smith Richards Butler, with a team led by Hong Kong based corporate partner Ivy Lai.

The US firm has also bid to be on the international panel for CRE's parent company China Resources Holdings, which is due to be finalised in the coming month.

Tesco first entered the Chinese market in September 2004, after acquiring a 50% stake in Taiwanese retailer Hymall which operated 25 hypermarkets in 10 mainland cities at the time.

Freshfields was the lead advisor for Tesco on its China debut, and has since been involved in a number of the brand's expansion activities in China and around the world.

Tesco, whilst understood to be undergoing some consolidation in the country, is also thought to be eyeing wealthier coastal areas for growth.

In a statement, the grocer said the proposed joint venture is consistent with its strategy of focusing on profitable routes to growth in fast-growing but less mature markets, with a disciplined approach to the allocation of capital.

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