UK – The British multinational grocer, Tesco, has entered into a conditional agreement to sell its business in Thailand and Malaysia to a combination of CP Group entities for an enterprise value of US$10.6 billion (£8.2 billion) on a cash and debt free basis.
Under the deal, Tesco will sell the business to a group of CP Group; C.P. Retail Development Company Limited, Charoen Pokphand Holding, CP All Public Limited Company and C.P. Merchandising.
The retailer said that the disposal will simplify the larger Tesco Group, enabling a stronger focus on its retail businesses in the UK and Ireland and in Central Europe.
According to the Group, the move will also allow the company to further de-risk the business by reducing indebtedness through a significant pension contribution of £2.5billion (US$3.27 bn).
The divestment, which is conditional on Tesco shareholder approval and customary regulatory approvals in Thailand and Malaysia, is expected during the second half of 2020.
“Following inbound interest and a detailed strategic review of all options, we are announcing the proposed sale of Tesco Thailand and Tesco Malaysia,” said Dave Lewis, Chief Executive of Tesco.
“This sale releases material value and allows us to further simplify and focus the business, as well as to return significant value to shareholders”
Over the last four years, Tesco claims that its performance has significantly improved, in particular within the UK, its largest and most important market, as well as across the wider Group.
In October 2019, Tesco announced that it had met or exceeded the targets it had set against each of its six key strategic drivers, and that all elements of its turnaround plan had been executed successfully.
The Group revealed that its balance sheet is now stronger, with total indebtedness reduced by £7 billion (US$9.16 bn) since the financial year end 2014/15.
According to the grocery retailer, this has been driven by strong business performance, the release of £1.7billion (US$2.23 bn) of value from the property portfolio, and selective asset disposals, including of the Korean business in 2015.
In addition, the Tesco has completed the merger with Booker, combining the largest wholesale food business in the UK with the largest food retailer and unlocking significant shareholder value in the process.
In February this year, the retail giant sold its 20% stake in Gain Land to a subsidiary of its joint venture partner, China Resources Holdings for £275 million (US$375m) in a deal that marked Tesco’s exit in China.
Tesco maintains that the improved business performance, combined with the reduction in indebtedness, means that the retailer now has an investment grade rating from its three covering rating agencies.
Upon completion of the sale in Malaysia and Thailand, Tesco will be a significantly more focused business with the leading market position in the UK and Ireland, with 3,769 stores from convenience formats through to larger stores, as well as our wholesale business, Booker.
The Group also has an established presence in four Central European countries, with 895 stores comprising hypermarkets and convenience formats in the Czech Republic, Slovakia, Hungary and Poland.