Tesco start review of strategic options in Thailand and Malaysia

Tesco is five years into a recovery plan launched after an accounting scandal capped a dramatic downturn in trading

Tesco is considering the sale of its operations in Thailand and Malaysia in order to refocus on its domestic business.

It remained unclear who the potential suitor is, although Clive Black, retail analyst at Shore Capital, suggested: "One can see how a number of major trade, family office and private equity investors in Asia could be interested in this trophy asset within the Tesco Group, albeit quite what local regulators think needs to be considered".

Shares in Tesco jumped almost 6% at one point on Monday after Britain's biggest retailer said it was considering a sale of its remaining Asian businesses, in Thailand and Malaysia, which analysts valued at up to $9 billion.

Tesco said the review was at an early stage and gave no details of the approaches received.

Tesco operates 74 stores in Malaysia and 1967 in Thailand under Tesco Lotus brand.

It said the evaluation was at an early stage and "there can be no assurance that any transaction will be concluded", adding that "a further announcement will be made if and when appropriate".

Tesco, like some counterparts, has been shrinking overseas to focus on its home market, where it is combating discount grocers and online competitors such as Amazon.com Inc.

Tesco's recent divestments are in line with its peers such as Carrefour SA, and Groupe Casino SA of France, which also in recent years have exited operations in countries such as Indonesia, Thailand and Vietnam.

On its website the company said it has started the Asian business review following "an interest in" but did not name the potential buyer or buyers. In the six months to Aug 24 the businesses together generated sales of 2.56 billion pounds (100 billion baht), up 1% at constant exchange rates from a year earlier, and operating profit of 171 million pounds, up 42.3%.

Tesco entered the Thai market in 1998 by buying a majority stake in Lotus Supercenter, a hypermarket concern, for $365 million from Thai conglomerate Charoen Pokphand Group. In June, it announced plans to open another 750 stores in Thailand. In recent years, the supermarket chain has left Japan, the United States and Turkey too.

Analysts at Bernstein valued the Asian business at 6.5 billion pounds to 7.2 billion pounds ($8.3 billion to $9.2 billion). He said the Thai business still had significant growth opportunities.



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