Tesco to sell its Malaysian and Thailand businesses to Charoen Pokphand Group for $10.6 billion

on Mar 9, 2020
Updated: Mar 11, 2020
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  • Tesco to sell its Malaysian and Thailand businesses to Charoen Pokphand Group for $10.6 billion.
  • Tesco to return $6.6 billion to shareholders following the completion of the transaction.
  • Tesco's central European division will be confined to Hungary, Slovakia, Czech Republic, and Poland.

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The
largest retailer of the United Kingdom, Tesco, revealed its deal with Charoen
Pokphand Group to sell its Malaysian and Thailand businesses on Monday. The
enterprise value associated with the deal was reported at $10.6 billion.
Following the completion of the transaction, Tesco said it plans on returning
$6.6 billion to the company’s shareholders.

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The
interest in Tesco’s assets had fueled a meticulous
review of the UK supermarket’s Asian businesses
towards the end of last
year. The move further suggested that the retailer is stepping back from its
previously announced lofty global ambitions.

Tesco
To Receive Shareholders And Regulatory Approvals In The Second Half Of 2020

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Upon
completion of the deal, Tesco said that its shareholders will receive cash in
the form of a special dividend and share consolidation. The announcement also
highlighted that there are several approvals to be received before the
transaction can be completed. The UK supermarket expressed its desire to not
only receive regulatory approvals from authorities in Malaysia and Thailand but
also get formal approval of Tesco’s shareholders before the company moves
forward with it.

According
to Tesco, it intends to receive the aforementioned approvals in 2020’s second
half with the deal likely to be finalized before the year-end. Upon completion
of the deal, Tesco will only remain operational outside of the UK (excluding Ireland)
in Hungary, Czech Republic, Slovakia, and Poland. The aforementioned four
countries will make up the Tesco’s central European division.

CEO
Lewis Says The Deal Will Generate Material Value And Simplify Business For
Tesco

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In
his statement on Monday, CEO Dave Lewis reiterated that selling the Malaysian
and Thailand businesses to Charoen Pokphand Group will generate material value
for Tesco. With added simplification, the company will be able to focus
intensely on its profitable businesses which will help return greater value to
the investors as well.

At
the time of writing, Tesco is exchanging hands at 240 GBX in the stock market
that translates to around a 6% decline in 2020 so far. Its performance in 2019,
on the contrary, remained largely upbeat with an annual gain of just over 30%. Tesco’s
share prices were seen at 195 GBX in January 2019 while the stock closed the
year significantly higher at 255 GBX in December. The largest
British multinational groceries and general merchandise retailer
currently
has a market cap of $31.21 billion with a price to earnings ratio of 17.99.

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