Saturday, May 31, 2008

Tesco PLC News: Tesco to Buy Royal Bank of Scotland's Share of 'Tesco Personal Finance' Business Joint-Venture For About ~1 Billion

Tesco PLC, parent company of Fresh & Easy Neighborhood Market USA, plans to acquire Royal Bank of Scotland's 50% share in the two companies' personal finance business joint venture, tomorrow's UK Sunday Times will report.

For those not already aware, major UK retailers like Tesco and Sainsbury's operate finance and insurance divisions, as well as being major players in the Internet service provider and mobile phone businesses, along with their food, grocery and hard and soft goods retailing operations in the nation.

These finance businesses are full line operations--banking, loans, credit cards--rather than the limited ones U.S. retailer's like Target and others operate which are just divisions designed to handle their own credit card business with customers.

Tesco is the leading retailer in the finance and insurance sectors in the UK. Sainsbury's also is a major player, as to a lessor extend is Wal-Mart-owned Asda.

In Tesco's case, it's substantial finance industry business has been owned in a 50-50 joint venture with the Royal Bank of Scotland (RBS), one of the UK's leading banking companies.

According to earlier reports, RBS turned down Tesco's offer to buy its 50% share of the finance business last month. However, it appears according to the Sunday Times' report the deal is now on.

Tesco's personal finance arm makes loans, issues credit cards and offers other personal financial services to consumers, but not to corporate or business customers.

If it acquires the 50% of RBS's share as the Sunday Times reports indicates is going to happen, 100% ownership of the personal finance business will allow Tesco to not only control the business completely, but to make a number of changes and add numerous new lines of business that's it's wanted to do for sometime but has been unable to because of the politics of the 50-50 joint venture.

Tesco also is a major player in the consumer insurance business in the UK. It's insurance arm offers consumers health, auto and other lines of personal insurance. Tesco's insurance operations are part of Tesco Personal Finance. You can learn more about Tesco's personal finance and insurance business here.

In contrast, big U.S.-based supermarket chains and mass merchandisers like Safeway Stores, Inc, SuperValue, Inc., Wal-Mart and Target, aren't in the personal finance and insurance business at all, with the exception of the Target (and a couple others) example offered above.

In fact, last year Wal-Mart wanted to open its own U.S. bank and financial institution which would function somewhat along the lines of what Tesco, Sainsbury's and Asda do in the UK--offering loans and related products to consumers.

The objection was so strong from U.S. Federal Government financial services regulatory agencies, Congress and various consumer groups however, Wal-Mart pulled back and decided to only set up an operation similar to Target's, which only deals with the mega-retailer's own credit card customers.

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