CP Group agrees to buy Tesco’s Asian Businesses for 10.6 billion

Tesco, the British multinational retailer, has entered into a conditional deal on 9 March 2020, to sell its business in Thailand and Malaysia to a combination of CP Group entities on a cash and debt-free basis for an enterprise value of USD 10.6 billion. The retailer said disposal would simplify the larger Tesco Group, allowing greater emphasis to be put on its retail businesses in Ireland and the United Kingdom and Central Europe.

This strategic move would also allow the company to further de-risk the business by reducing indebtedness through a significant pension contribution of USD 3.27 billion. The divestment is expected during the second half of 2020, conditional on Tesco shareholder approval and usual regulatory approvals in Thailand and Malaysia.

Dave Lewis, Tesco's chief executive, said that the company is announcing the proposed sale of Tesco Thailand and Tesco Malaysia following inbound interest and a thorough strategic analysis of all options.  This sale unlocks material capital and helps to further simplify and concentrate the company, as well as give substantial value to the shareholders.

Over the last four years, Tesco claims to have dramatically improved its performance, especially within the United Kingdom, its largest and most important market, as well as across the wider Group. Tesco announced in October 2019 that it had reached or surpassed the goals it had set against each of its six main strategic drivers, and that it had successfully implemented all elements of its turnaround plan. It also announced that its balance sheet is now stronger, with overall debt declining by USD 9.16 billion since the end of the 2014-15 financial year. Tesco has also completed the merger with Booker, merging the United Kingdom's largest wholesale food company with the largest grocery retailer and creating major shareholder value during the process.

The retail giant sold its 20% interest in Gain Land in February 2020 to China Resources Holdings, a subsidiary of its joint venture partner, for USD 375 million in a transaction that marked Tesco's exit in China. Tesco believes that the improved financial performance, combined with the reduction in debt, means that the retailer now has an investment-grade ranking from the three rating agencies that monitor.

After completion of the sale in Malaysia and Thailand, Tesco will become a substantially more focused company with a prominent market position in the United Kingdom and Ireland, with 3,769 stores from small formats to larger stores, as well as the wholesale company, Booker.

The Group also has an established existence in four Central European countries, with 895 stores in the Czech Republic, Slovakia, Hungary, and Poland that comprise hypermarkets and convenience formats.