logo-loader
viewTesco PLC

Tesco weighs potential £7bn sale of Asia grocery chain

Asia generated £4.9bn of sales and £286mln of operating profit in the past financial year

Tesco PLC -

Tesco PLC (LON:TSCO) is mulling whether to sell its last remaining Asian supermarket businesses.

The FTSE 100 grocer said it had received “inbound interest” about its 2,000-store Tesco Lotus grocery chain in Thailand and Malaysia, and was now carrying out a review of options.

READ: Tesco boss Dave Lewis announces shock departure

“The evaluation of strategic options is at an early stage, no decisions concerning the future of Tesco Thailand or Malaysia have been taken, and there can be no assurance that any transaction will be concluded,” the company said.

Asia generated 9% of group sales and 13% of group operating profit in the past financial year, with £4.9bn of sales and £286mln of operating profit at a profit margin around double the UK business.

The group said in the summer that Thailand was a key part of its future growth, with management aiming to underscore its leading market position in the market through the opening of around 750 convenience stores over the next three to four years.

A price of US$9bn (£6.8bn) has been suggested in reports, which would eclipse the sale of Tesco’s South Korea business for US$6bn in 2015 and an ignominious exit from Japan a few years earlier.

The decision of whether or not to sell will comes just over two months after the group's chief executive Dave Lewis revealed he was leaving next summer, with Walgreens Boots Alliance chief operating officer Ken Murphy poached to be his replacement.

"Needs to be knock-out price"

Tesco shares rose 5% to 244.4p on Monday.

Broker Shore Capital said "for any approach to be accepted by the Tesco Board for Thailand then it needs to be highly attractive if not a knock out price" as Asia and Thailand, in particular, is a "jewel in Tesco's crown".

It would, however, result in a "material distribution to shareholders albeit remove a key growth strand for the group," said analyst Clive Black in a note to clients, noting that current circumstances are very different to those crisis conditions that contributed to the previous sale of the South Korea business.

“It is unclear who the unnamed bidder is, but it is presumably a trade operator (rather than a financial buyer) and they must have deep pockets, because these highly profitable Asian operations are worth many billions," said independent retail analyst Nick Bubb.  

“It is also unclear what Tesco would do with the money, but perhaps we shouldn’t get ahead of ourselves, as Tesco has said the strategic review of Asia is at an early stage”.

Quick facts: Tesco PLC

Price: 248.6 GBX

LSE:TSCO
Market: LSE
Market Cap: £24.35 billion
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Full interview: Revenue guidance from OptiBiotix as it eyes NASDAQ listing

OptiBiotix Health (LON:OPTI) provides a commercial progress update, explaining why in their financials some items are separated. CEO Stephen O'Hara tells Proactive London what's behind his thinking adding that Optibiotix hopes to reach profitability in 2020. News here too on Sweetbiotix and...

1 day, 17 hours ago

3 min read