Carlos Gutierrez, Xiao Zhun
Elizabeth Dalziel  /  AP
U.S. Commerce Secretary Carlos Gutierrez, left, and Chinese Vice Minister of Commerce Xiao Zhun attend an event announcing Home Depot, GE Aviation and VeriSign deals with Chinese companies Wednesday in Beijing.
updated 12/13/2006 12:04:58 PM ET 2006-12-13T17:04:58

Home Depot Inc. announced its first foray into China's booming market on Wednesday with the purchase of a Chinese chain of 12 home-improvement stores that modeled itself on its giant American counterpart.

Home Depot is a latecomer to China, where competitors such as Sweden's IKEA, Britain's B&Q and Chinese retailers already have a presence.

Home Depot declined to release the purchase price for The Home Way, based in the eastern city of Tianjin. But earlier news reports put the value of the deal at $100 million.

“We have expanded in North America and see China as a chance to grow,” Home Depot's president for international operations, Annette Verschuren, told reporters. “We see great opportunities to grow very aggressively.”

The Home Depot acquisition was announced at a ceremony attended by U.S. Commerce Secretary Carlos Gutierrez ahead of U.S.-Chinese trade talks this week in Beijing.

Foreign retailers are looking to China to drive sales as growth in the United States and Europe slows and millions of Chinese families buy homes and start to acquire furniture and appliances.

Estimates of the size of China's home-improvement market range from $15 billion to as much as $50 billion a year. Verschuren said Home Depot is forecasting annual growth rates of 20 percent.

The Home Way, founded by Chinese entrepreneur Du Sha, modeled itself on Home Depot. Verschuren said the two companies agreed in 1996 to “share ideas” and Home Depot helped to train Home Way employees.

Verschuren said Home Depot decided to enter China by acquiring Home Way after considering starting a business from scratch.

She said a key reason for the acquisition was to gain access to the experience and local knowledge of Home Way's executives and 3,000-member sales force.

Verschuren said Home Depot followed a similar strategy in Mexico and Canada, where it acquired local home-improvement retailers and used them as a basis for rapid expansion.

China's home-decorating boom got moving in the late 1990s when the government began encouraging families to buy apartments in order to get state companies out of the business of housing workers.

IKEA opened its first store in mainland China in 1998 and in April opened a Beijing outlet that is its second-largest in the world after its home city of Stockholm.

B&Q, owned by Kingfisher PLC, opened in Shanghai in 1999 and later expanded to Beijing.

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