Tesco to buy 36 S.Korean stores

By Rhee So-eui and Rachel Sanderson

SEOUL/LONDON (Reuters) - Tesco (TSCO.L) said on Wednesday it would buy 36 discount stores from South Korea's E-Land for $1.9 billion (977 million pounds) in its biggest single acquisition.

Tesco, like global rivals Wal-Mart Stores (WMT.N) and France's Carrefour (CARR.PA), is seeking to further expand in fast-growing international markets to offset slowing growth at home. South Korea is Tesco's second most profitable market after Britain.

The deal allows Tesco's South Korean discount store business, the second-largest in the country, to beef up in size and challenge the top-ranked E-Mart chain, run by Shinsegae (004170.KS).

Shares of rival South Korean retailers dropped sharply in anticipation of the deal, which will intensify competition.

"We've been pursuing this for two years, it is a terrific strategic opportunity for us to be equal number one in the market," Andrew Higginson, Tesco Finance and Strategy Director, told Reuters in London.

Higginson said this was the biggest acquisition yet undertaken by Tesco, but it did not necessarily mark a change in Tesco's acquisition strategy.

"There are very few deals of this size available. We are always in the market, in markets where we are successful, we are always looking for new stores," he said.

Tesco dominates British retailing with some 2,000 stores and more than one-third of the grocery market share.