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Home Depot Set To Expand In China

Reuters have announced that top U.S. do-it-yourself chain Home Depot Inc. is seeking to buy a stake in a Chinese peer for up to $500 million to win a foothold in the country's fast-growing home improvement market.

Home Depot is in talks with Orient Group Inc. to take a stake in its unit Orient Home, which operates over 20 DIY outlets nationwide, the China Business News cited unidentified sources as saying. Related newsDow Falls 14 on Record Oil Prices European Stocks End Lower Tenacious Markets to Be Put to the Test It expects to finalize a deal at the end of the month, the paper added. It did not specify the size of the stake the U.S. firm was eyeing.

An Orient Home official told Reuters the two companies were "in discussions" but would not elaborate. Home Depot, which runs two procurement centers in China, announced plans last June to set up shops in the world's seventh largest economy. But it 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.

The belated arrival of Home Depot, via acquisition or otherwise, would heat up competition in the market. B&Q has seen five consecutive years of double-digit growth since entering China in 1999, its China president, David Wei, told Reuters earlier. To sustain that momentum, B&Q bought five outlets from PriceSmart China in November and took over the mainland operations of rival OBI in April. The market is expanding very quickly, at 15 to 20 percent annually, Wei said of 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 retail conglomerate 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 five years.

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