US home improvement retailer Home Depot Inc. said on Wednesday it had signed an agreement to buy Chinese home improvement chain The Home Way, marking its first foray into retailing in China.
The acquisition will give it 12 stores in six cities and access to a $50 billion home improvement market that is growing at 20 percent per year, the US company said.
"The acquisition of The Home Way provides us with an immediate presence in this country," Annette Verschuren, president of Home Depot Asia/Canada, told a press briefing in Beijing.
"I anticipate we will grow as quickly as, if not quicker than the market," Verschuren added.
Home Depot said the deal had received necessary Chinese government regulatory approvals and is expected to close by the end of the year. Terms of the deal were not disclosed.
The purchase of the Chinese stores comes as Home Depot looks to establish multiple platforms for growth, including foreign expansion and a move into professional markets, as its retail stores approach saturation in the United States.
In January 2006, Home Depot said it would significantly scale back store growth with plans to open 400 to 500 stores through 2010, about half the number opened in the previous five years.
Home Depot previously failed to buy bigger Chinese chain store Orient Home, a source familiar with the situation told Reuters.
Privately owned The Home Way Co. Ltd., based in the eastern port city of Tianjin, plans to use part of the proceeds from Home Depot to pay down debts owed to its suppliers, the source said.
Home Depot has been looking to set up stores in China for at least two years. The company opened purchasing offices in Shanghai and Shenzhen in 2002, and received approval from China's government to invest in stores there in 2005.
The acquisition is part of intensified takeover activity in the Chinese retail sector. British supermarket chain Tesco (TSCO.L) said on Tuesday it was increasing its stake in Chinese retailer Hymall.
Home Depot competes for acquisitions in China with do-it-yourself firm B&Q, part of Britain's top home improvement retailer Kingfisher Plc. (KGF.L).
B&Q, which bought the Chinese operations of German rival OBI in April, is on track to having 60 stores in China by the end of this year and 100 by 2010.