LONDON: Tesco plans to return $6.6 billion to shareholders after agreeing to sell its supermarket businesses in Thailand and Malaysia to Charoen Pokphand Group as part of plans to refocus on Britain.
Having withdrawn from South Korea in 2015, Britain’s biggest retailer began a review of its remaining Asian businesses last year in a further retreat from its global ambitions.
The sale of its Thai and Malaysian businesses for an enterprise value of $10.6bn comes more than five years into a recovery plan launched by chief executive Dave Lewis after an accounting scandal and dramatic trading downturn.
Lewis declared Tesco’s turnaround complete last October and will step down in October this year, when he will be succeeded by Ken Murphy, formerly of Walgreens Boots Alliance.
Bernstein analyst Bruno Monteyne yesterday said that Tesco had secured “a very strong valuation” for the Thai and Malaysian
assets and investors could look forward to a special dividend representing 21 per cent of the group’s current market capitalisation.
The price for the businesses, including debt, implies an enterprise value multiple of 12.5 time core earnings.
After completion of the disposal to the Thai group controlled by Dhanin Chearavanont, Tesco intends to return cash to shareholders via a special dividend with an associated share consolidation. It will also inject £2.5bn ($3.28bn) into its pension fund.
Reportd earlier said that CP Group was the frontrunner to buy the assets.
“The coronavirus outbreak won’t stop people from eating: on the contrary, food-at-home will get a boost at the cost of food-out-of-home,” said Monteyne.
The deal is conditional on the approval of Tesco’s shareholders and regulatory approvals in Thailand and Malaysia, which is expected during the second half of 2020.
CP Group is buying Tesco’s assets through its CP Foods and CP ALL businesses.
CP Group runs its 12,000 7-Eleven convenience stores through CP All and about 80 cash-and-carry stores under Siam Makro.
It will gain control of the 1,965 stores Tesco operates in Thailand – much of which the British retailer bought from CP Group during the 1997-8 Asian financial crisis – including 200 Tesco Lotus hypermarkets and 1,600 Tesco Lotus Express convenience stores, plus 74 outlets in Malaysia.
&uuid=(email))