Tesco sells Thailand, Malaysia units for £8 billion

Britain’s biggest retailer Tesco said Monday that it has agreed to sell its businesses in Thailand and Malaysia to Thai conglomerate CP Group for £8.0 billion.

“Following inbound interest and a detailed strategic review of all options, we are announcing today the proposed sale of Tesco Thailand and Tesco Malaysia,” said outgoing Chief Executive Dave Lewis in a statement, adding the supermarket chain would return £5.0 billion of the proceeds to investors.

“This sale releases material value and allows us to further simplify and focus the business, as well as to return significant value to shareholders.”

Tesco added that the divestment will also slash debt and streamline the group, enabling a “stronger focus” on UK, Irish and central European activities.

“The disposal will further de-risk the Tesco 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,” the retailer said.

The move was unanimously agreed by the Tesco board, but remains conditional on shareholder and regulatory approvals. The deal is set to complete in the second half of this year.

Having withdrawn from South Korea in 2015, Britain’s biggest retailer began a review of its remaining Asian businesses last year in a further retreat from its global ambitions.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 announcement comes as Dave Lewis prepares to step down in 2020, having overseen a major overhaul at Tesco during his five years at the helm, axing thousands of jobs as part of a massive cost-cutting programme.

Lewis is leaving for personal reasons and will be replaced by Walgreens Boots Alliance executive Ken Murphy.

CP Group 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.

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).

Completion of the deal for the Thai and Malaysian assets would increase speculation over the future of Tesco’s central European division, consisting of stores in the Czech Republic, Hungary, Poland and Slovakia, which would be the group’s only remaining overseas supermarket operation apart from Ireland.