Tesco sells S Korea business
September 7, 2015
UK retail major Tesco said Monday it had sold Homeplus for more than 4 billion pounds (5.5 billion euros, $6 billion) to South Korean investor MBK Partners.
MBK Partners is the leader of a consortium that also includes Canadian pension funds and Singapore's investment fund Temasek Holdings.
Tesco said it would receive 4.004 billion pounds in cash under the deal, while the net cash proceeds after taxation and other transaction costs, would come in at 3.351 billion pounds.
"This sale realizes material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet," Tesco Chief Executive Dave Lewis said in a statement.
Debt cut hopes
Homeplus is South Korea's second largest retail chain with 140 hypermarkets, 375 smaller supermarkets and 327 convenience stores across South Korea. Tesco established the company as a joint venture in 1999 with South Korean conglomerate Samsung. Tesco originally held an 81 percent share but bought Samsung's stake in several stages, taking control in 2011.
Tesco said it would use the 4 billion pounds to reduce its debt, which currently amounted to 4.2 billion pounds. The deal, it added, was expected to be completed during the final quarter of this year, pending shareholder approval from Tesco and South Korean government approval.
Britain's biggest retailer is seeking to overhaul its business after reporting the biggest annual loss in its near 100-year history of 5.74 billion pounds for the year to February. The company is struggling amid mounting competition from rivals such as Germany's Lidl and Aldi discount supermarket groups.
Moreover, Tesco is facing a fraud probe after a huge accounting scandal that saw it overstate profits by 263 million pounds due to errors stretching back to before 2013. In February CEO Lewis announced plans to axe as many as 10,000 jobs and shut 43 stores in a company-wide overhaul. The Tesco boss has also sold off its broadband Internet arm and its TV-streaming service Blinkbox.
uhe/cjc (AP, AFP, Reuters, dpa)