PETALING JAYA: Sime Darby Bhd will be exiting its hypermarket business by the second half of 2020 (2H20), following the disposal of its 30% stake in Tesco Stores (M) Sdn Bhd (Tesco Malaysia) for RM300mil.
The disposal is part of a larger deal in which Tesco’s parent company, the UK-listed Tesco PLC, had agreed in March 2020 to sell its businesses in Thailand and Malaysia to Thailand’s C.P. Group (CP) for an enterprise value of US$10.6bil (about RM46bil).
Sime Darby told Bursa Malaysia yesterday that its wholly-owned subsidiaries, Sime Darby Allied Products Bhd and Sime Darby Holdings Bhd, have entered into conditional agreements with C.P. Retail Development Co Ltd, Tesco Holdings B.V. and Tesco PLC to divest its 30% stake in Tesco Malaysia.
The proposed disposal is in line with Sime Darby’s ongoing non-core asset rationalisation exercise.
It should be noted that the 30% equity interest sale is conditional upon the approval of the Domestic Trade and Consumer Affairs Ministry, the sale of Tesco BV’s shares in Tesco Malaysia and the sale of Tesco’s Thai business to CP.
Sime Darby expects to make an estimated net gain on disposal of RM270mil from the sale of its stake in Tesco Malaysia, a joint venture it has held since 2001. It is believed that Sime Darby fetched a higher valuation comparison for the sale of the Malaysian business than the parent.
“The proposed disposal is not expected to have any material financial impact on Sime Darby for the financial year ending June 30,2020 (FY20) as the proposed disposal is expected to be completed in 2H20, ” the group said.
However, Sime Darby expects to see a material positive impact on its earnings and earnings per share in FY21, as a result of the transaction.
“The proposed disposal is also expected to have a positive impact on the consolidated net assets per share and consolidated gearing of Sime Darby for FY21.”
In a separate statement, Sime Darby group chief executive officer Datuk Jeffri Salim Davidson said the deal provided the group with an opportunity to exit its non-core hypermarket business at a reasonable valuation.
“This transaction is part of our ongoing efforts to rationalise our non-core assets.
“We have come a long way with our joint venture with Tesco. We opened our first store in Puchong in 2002. We have grown the business over the years and now have 69 stores nationwide, ” he said.