SUPERMARKET chain Tesco is hoping to make it big in Japan as part of its international expansion plans.

The group plans to buy C Two-Network, owner of 78 convenience stores concentrated mainly in the Tokyo area, in a deal that values the retailer at £173m.

Tesco, which operates in ten countries outside the UK, first signalled in 2000 that it wanted a foothold in Japan.

Sir Terry Leahy, chief executive, said the proposed move provided Tesco with access to a market with potential for growth.

He said: "C Two-Network is a profitable value retailer with good stores in good locations, run by a young management team.

"We are confident that by combining Tesco's retailing capability and the strength and local knowledge of the C Two-Network team, we can grow the business further."

Under the proposals, which have been backed by C Two-Network, Tesco will offer shareholders a premium of 35 per cent to the average daily closing price of the stock.

Tesco will keep the present management team and retain C Two-Network brands, including Tsurukame and Foodlet.

It plans an aggressive expansion programme with between ten and 20 stores opening a year.

In the year to March 31, C Two-Network achieved record revenues of £286m and operating profits of £20.5m.

Tesco's international operations are worth about a quarter of all sales, with stores in Thailand, South Korea, Taiwan, Malaysia, Czech Republic, Hungary, Republic of Ireland, Slovak Republic and Poland.