by Karen Rebelo

Britain's Tesco Plc, the world's number three retailer, is set to announce on Friday an agreement to merge its operations in China with a division of state-controlled retailer China Resources Enterprise (CRE), Sky News reported on Thursday citing people close to the talks.

Sky reported that the supermarket group is set to sign an agreement to merge its store estate in China with that of Vanguard, part of CRE.

A spokeswoman for Tesco declined to comment on the report.

The Sky report, citing people familiar with the talks, said Tesco was likely to have a 20 percent stake in the enlarged business and that finalising the agreement was likely to take several months.

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