Tesco to offload its Thai, Malaysian retail chains in a $10.6 bn deal
11 Mar 2020
Britain’s biggest retailer Tesco has agreed to sell its retail businesses in Thailand and Malaysia to a combination of CP Group entities, in a deal valued at $10.6 billion, as part of its move to bring significant return to shareholders and further de-risking business.
Tesco proposes to sell its businesses in Thailand and Malaysia to a combination of CP Group entities, including CP Retail Development Company Limited, Charoen Pokphand Holding Co Ltd, CP All Public Limited Company and CP Merchandising Co Ltd.
Tesco said its decision follows interest received from the CP Group and a detailed strategic review.
Consideration for the disposal represents an enterprise value of $10.6 billion (£8.2 billion) on a cash and debt free basis, implying an EV/EBITDA multiple of 12.5x1.
Tsco expects net cash proceeds of $10.3 billion (equivalent to £8.0 billion) before tax and other transaction costs
Following completion of the sale, the board intends to return c.£5.0 billion to shareholders via a special dividend with associated share consolidation.
Tesco said the sale will further de-risk its business by reducing indebtedness through a £2.5 billion pension contribution that, along with other measures, is expected to eliminate the current funding deficit and significantly reduce the prospect of having to make further pension deficit contributions in the future.
Tesco board has unanimously agreed to the deal, which, the company said, will be in the best interests of all stakeholders.
Tesco expects the transaction to be completed by the second half of 2020, depending on Tesco shareholders’ approval and customary regulatory approvals in Thailand and Malaysia.
The sale will enable the Tesco Group to focus on driving cash generation and returns to shareholders from its retail businesses in the UK, Ireland and Central Europe.
"This sale releases material value and allows us to further simplify and focus the business, as well as to return significant value to shareholders. I would like to thank all of our Tesco Thailand and Tesco Malaysia colleagues for their dedication, professionalism and service to our customers, which has resulted in the creation of such a strong business. I am confident that the agreement we have reached with CP Group presents an exciting opportunity for their continued success," Dave Lewis, chief executive of Tesco, said.
The sale of Tesco’s Thai and Malaysian businesses comes more than five years after Lewis initiated a recovery plan following an accounting scandal and dramatic trading downturn.
Lewis, who declared Tesco’s turnaround complete last October, will step down in October this year, when he will be succeeded by Ken Murphy, formerly of Walgreens Boots Alliance.
CP Group runs its 12,000 7/11 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. The British retailer had bought most of these from CP Group during the 1997-8 Asian financial crisis. These include 200 Tesco Lotus hypermarkets and 1,600 Tesco Lotus Express convenience stores, plus 74 outlets in Malaysia.
Chearavanont, senior chairman of CP Group, has repeatedly said he wanted to buy back the company.
Tesco completed its exit from China last month with the 275 million pound sale of its joint venture stake to state-run partner China Resources Holdings (CRH).