Tesco (TSCO) will return around £5bn to shareholders through a special dividend and eliminate its pension deficit with a £2.5bn contribution, after the supermarket confirmed that it would sell its Thailand and Malaysia businesses.
The move represents Tesco’s departure from Asia, after which it will have operations in the UK, Ireland and central Europe. It first admitted interest in its Asian operations in December 2019, and has now agreed to sell its Thai and Malaysian assets to Thai conglomerate group CP Group for $10.6bn (£8.1bn). The disposal follows February’s announcement that Tesco had sold its 20 per cent stake in Chinese retail joint venture Gain Land to partner China Resources Holdings, pocketing £275m.
After the Chinese joint venture Gain Land sale was announced last month, Tesco house broker Shore Cap urged the supermarket to get a good price for its Thai business, which it described as “perhaps its most apparent growth piston”. Shore Cap put a potential price tag on Tesco’s Thai and Malaysia operations of around £7bn-£8bn. “We have stated several times that if a suitor was interested in Tesco’s Polish business, then we would expect the group board to listen with considerable interest,” the broker added. Changes to Sunday trading laws have depressed Polish sales, and Tesco closed 62 unprofitable businesses there in its 2019 financial year.
Tesco expects to complete its Asian exit in the second half of 2020. In a statement, the supermarket said that it hopes that its mammoth pension contribution will “significantly reduce the prospect of having to make further pension deficit contributions in the future”. Outgoing chief executive Dave Lewis said that the deal “allows us to further simplify and focus the business, as well as to return significant value to shareholders”.
