PETALING JAYA: Britain’s largest retailer Tesco Plc has given the green light to sell its business in Thailand and Malaysia to a combination of Thailand’s CP Group entities for an enterprise value (EV) of US$10.6bil (RM44.63bil or equivalent to £8.2bil).
This will involve Tesco’s entire shareholding in Tesco Stores (Thailand) Ltd and Tesco Stores (Malaysia) Sdn Bhd.
The consideration payable to Tesco is on a cash and debt-free basis, representing an EV/earnings before interest, tax, depreciation and amortisation multiple of 12.5 times, based on the financial year ended Feb 23,2019 on a post-IFRS 16 basis.
The transaction valued Tesco Malaysia at an EV of US$700mil, including US$600mil of net debt, while Tesco Thailand was valued at an EV of US$9.9bil, including US$400mil of net cash.
Net cash proceeds from the disposal are expected to be US$10.3bil before tax and other transaction costs, anticipated to be in the region of £100mil.
Tesco chief executive officer Dave Lewis said the sale releases material value and allows to further simplify and focus the business and return significant value to Tesco’s shareholders.
“I would like to thank all our Tesco Thailand and Tesco Malaysia colleagues for their dedication, professionalism and service to our customers, which has resulted in the creation of such a strong business.
“I am confident that the agreement we have reached with CP Group presents an exciting opportunity for their continued success, ” he said.
The companies under the CP Group that Tesco’s Thailand and Malaysian businesses will be sold to are C P Retail Development Company Ltd, Charoen Pokphand Holding Co Ltd, CP All Pl and C P Merchandising Co Ltd.
The completion of the disposal is expected to occur in the second half of 2020.
Tesco said the disposal would simplify Tesco Group, enabling a stronger focus on its retail businesses in the UK and Ireland and in Central Europe and further de-risk the business by reducing indebtedness through a significant pension contribution of £2.5bil.
Tesco’s operations in Thailand began through Ek-Chai, which operates under the name Tesco Lotus with 1,967 stores across the country.
In Malaysia, Tesco began its operations in 2002, as part of a joint venture with Sime Darby Bhd, in which the latter holds 30%.
Sime Darby has been looking to divest its stake in Tesco, as it looks for opportunities to divest all its non-core businesses.