LONDON/SEOUL: Tesco is selling its South Korean arm to a group led by private equity firm MBK Partners for $6.1bn, it said yesterday, as the British supermarket retreats from foreign markets to focus on reviving its troubled domestic business.
The sale of Homeplus, its largest overseas asset, represents the first large divestment by Tesco boss Dave Lewis, who wants to slash debt and rid the firm of its junk credit rating after its profits were battered by market share losses to discounters Aldi and Lidl in Britain and by an accounting scandal. It follows Tesco’s costly exits from Japan and the United States, as well as a reduction of its exposure to China, under previous management and highlights the difficulty Western retailers have had away from their home markets.
Tesco has agreed to sell Homeplus to investors led by MBK and including the Canada Pension Plan Investment Board, Public Sector Pension Investment Board and Temasek Holdings.
“This sale realises material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet,” said Lewis, a former Unilever executive who was hired last September to lead Tesco’s turnaround.
Under the terms of the largest-ever private equity transaction in Asia, Tesco will receive £4bn ($6.1bn) in cash. After adjustments for tax and transaction costs, the net cash proceeds, to be received in a combination of US dollars and Korean won, will be around £3.35bn. Tesco said the Homeplus disposal would reduce its total indebtedness, which stood at £21.7bn as of end-February 2015, by £4.225bn.
Reuters
