Business

Tesco may ring up £7.2bn as it eyes sale of Asian divisions

Britain’s biggest supermarket chain, Tesco, is considering the sale of its operations in Thailand and Malaysia as it refocuses on the domestic business, amid mounting challenges in the UK.

The firm, which operates more than 150 stores across Ireland, is carrying out a strategic review of the businesses after receiving what it called inbound interest.

A sale could value the operations at £6.5bn (€7.7bn) to £7.2bn, Sanford C Bernstein analyst Bruno Monteyne said. The Thai operation is a “great-quality business” and is undervalued as part of a larger group, Mr Monteyne said.

“That in itself provides ample justification to consider a disposal, especially if there is unsolicited interest,” he said.

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Tesco spokesman Simon Rew declined to comment on the valuation.

While a sale would mean losing the fastest-growing part of its operations, Tesco would get an infusion of cash to continue restructuring its core UK business that has cut thousands of jobs and shifted to new formats, including checkout-free stores. It would also allow the British retailer to exit a competitive Asian region that has stymied European peers like Carrefour.

Tesco Thailand is the biggest hypermarket chain in the country and operates 1,967 stores in total, while the Malaysian business has 74 shops. The Thai business alone could be valued at almost $7bn (€6.3bn) because it includes real estate assets, Dow Jones reported.

In the first half of fiscal-year 2020, the retailer’s entire Asia business produced £2.6bn of revenue, accounting for about 8pc of total sales.

While still dominant in Thailand, Tesco is grappling with challenges like chronically weak consumption trends, an increasingly stringent regulatory environment and “formidable, well-connected competition”, said Maria Lapiz, Bangkok-based head of research at Maybank Kim Eng Securities (Thailand).

“There is no longer-term growth here, and Tesco may want to rationalise its business and raise funding in the process as well,” she said.

Tesco has streamlined its domestic operations under outgoing CEO Dave Lewis, including pulling back from some international markets.

The company is also considering a sale of its struggling Polish operations, people familiar with the situation have said.

Bloomberg

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