Supermarket giant Tesco (TSCO) has said a last farewell to the US, with the announcement that it has sold its floundering Fresh & Easy business to a private equity and venture capital firm called Yucaipa, which specialises in turnaround investments in food-related businesses.
Yucaipa will acquire more than 150 stores, as well as Fresh & Easy's Riverside distribution and production facilities, and will take on more than 4,000 of Fresh & Easy's employees. As part of the deal, Tesco will loan the business £80m, secured against the Riverside facility. On top of that, Tesco will have to pay £70m in additional expenses, which includes store closures that are not part of the deal with Yucaipa.
Fresh & Easy unveiled its first stores in 2007, but Tesco was never able to make a success of the venture. In the 2013 financial year, the business generated a net loss before tax of £163.4m. The announcement follows news last month that Tesco is in talks with China Resources Enterprise (CRE) to merge their respective supermarkets in China through a joint venture, with Tesco owning 20 per cent of the company. China is a notoriously tough market for foreign supermarkets to crack and the tie-up reflects this. As we've pointed out before, teaming up with a local player is something Tesco might have benefited from in the US.
