Best Buy Makes a Major Move Into Chinese Market

SHANGHAI — Best Buy Co. agreed Friday to purchase a controlling stake in China’s fourth-biggest electronics retailer for $180 million to enter the world’s fastest-growing major market.

Best Buy, based in Richfield, Minn., said acquiring the stake in privately held Jiangsu Five Star Appliance Co. would give it 136 stores in eight of China’s 34 provinces. Five Star’s sales rose more than 50% to about $700 million last year, Best Buy said.

The American company, which plans to open its own brand store in China this year, sees international growth as part of its strategy for increasing revenue as much as 13% this year.

Leading retailers, including Wal-Mart Stores Inc. and Carrefour of France, are expanding in the most populous nation after China relaxed laws at the end of 2004 to let foreign companies open stores without local partners.

“Best Buy will probably help Five Star to open more stores to compete with larger rivals,” said Hu Hongke, a retail analyst at China Merchants Securities Co. in Shanghai.

China’s retail sales climbed 12% to $834 billion last year. The government is encouraging consumer spending to lessen the economy’s reliance on investment and exports for growth. China’s economy grew 10.2% in the first quarter.

Best Buy plans to open its first store in China this year, Robert Willett, chief executive of Best Buy International, said in a statement.

The retailer said March 31 that it planned to open an 86,000-square-foot location in Shanghai.

The Five Star transaction is expected to close in June.

China’s consumer electronics sales are projected to grow by more than 10% annually for the next decade, reaching $100 billion in 2010, Best Buy said.

Five Star, based in the eastern city of Nanjing, sells air conditioning, video and audio products, appliances and digital communication devices. The company, founded in 1998, has more than 12,000 employees, according to the Best Buy statement.

Shares of Best Buy fell $1.22, or 2.3%, to $52.60. Best Buy’s stock value has risen 21% this year.