Britain’s largest retailer Tesco has agreed on a deal with Thailand’s CP Group to sell off its businesses in Thailand and Malaysia for a value of $10.6 billion.
The company said in a statement in Monday that entire shareholding in Tesco Stores (Thailand) Ltd, Tesco Stores (Malaysia) Sdn Bhd will be transferred to the CP Group in eth deal.
The companies under the CP Group are C.P. Retail Development Company Ltd, Charoen Pokphand Holding Co., Ltd, CP All PLC and C.P. Merchandising Co., Ltd.
“The disposal will simplify the Tesco Group, enabling a stronger focus on its retail businesses in the UK and Ireland and in Central Europe. The disposal also realises material value for Tesco’s shareholders and allows the Tesco Group to further de-risk the business by reducing indebtedness through a significant pension contribution of £2.5bil,” Tesco said in a statement.
The value of the deal was pegged at $10.6 billion on a cash and debt free basis wihc represented an EV/EBITDA multiple of 12.5 times, Tesco said.
Tesco expects to generate net cash proceeds of $10.3bil before tax and other transaction costs.
Tesco had entered the Thailand market in 1998 through its brand called Ek-Chai, which operates under the name “Tesco Lotus”. This comprised of a large network of stores across the Tesco Thailand in addition to an online shopping platform as well as third-party applications such as Lazada and Happy Fresh.
In the financial year ended 23 February 2019, revenue of £4.1 billion was generated by Tesco Lotus and currently has a network of a total of 1,967 stores across Tesco Thailand which serves a weekly customer base of more than 13 million customers.
An attractive and profitable mall business have been developed by the company in many large freehold and leasehold stores Tesco Thailand as a part of its offer to customers and to support the core grocery business. That is among the largest of its type of operations in the Thailand market.
Tesco had entered the Malaysian market in 2002 under the brand name Tesco Malaysia through a joint venture with Sime Darby Bhd.
Tesco Malaysia is one of the leaders in the grocery retailing market in Malaysia and has a very strong brand presence in the market,.
“It generated approximately £800mil in revenue (excl. VAT, incl. fuel) in the financial year ended 23 February 2019 and operates a network of 68 stores across Malaysia. Tesco Malaysia supplies its stores from two distribution centres in Malaysia, with its stores and distribution centres located on and within land and buildings either owned, leased or tenanted by Tesco Malaysia,” Tesco said in the statement.
Similar to its business format in Thailand, a highly successful mall business is operated by Tesco Malaysia in addition to its large network of retail stores.
“Following completion, the board intends to return c.£5bil to shareholders by way of special dividend, ” the company said.
(Adapted from TheStar.com)