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

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

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.

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

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

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.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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