Appliance retailer Home Depot Inc. announced plans to buy a stake in Orient Group Inc., a Chinese home improvement retailer for up to U.S. $500 million.
Home Depot said that it is in talks with Orient Group. to take a stake in its unit Orient Home, which operates over 20 outlets in China, the China Business News reported.
Home Depot said that it expects to finalize a deal by the end of June 2005. The retailer, which runs two procurement centers in China, announced plans last June to set up shops in China, but has made few moves so far, leaving its European rival, Kingfisher Plc. unit B&Q, to dominate a market estimated to be worth some $50 billion.
B&Q has seen 5 consecutive years of double-digit growth since entering China in 1999, its China president, David Wei, told Reuters. To sustain that momentum, B&Q bought five outlets from PriceSmart China in November 2004 and took over the mainland operations of rival OBI in April.
The market is expanding very quickly, at 15 to 20 percent annually, Mr. Wei said due to a highly fragmented industry dotted with mom-and-pop outfits, niche stores that stock one product type, and a few budding domestic one-stop shops.
Local competitors include Home Mart, controlled by Friendship Co., with about 20 outlets.
France's Leroy Merlin also joined the fray last year, opening its first China store in Beijing -- its first in Asia -- and said it would run 20 outlets across the country within 5 years. (Reuters)
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