Tesco is selling its business in Malaysia and Thailand to Charoen Pokphand Group for US$10.6 billion to "further simplify and focus the business", according to chief executive Dave Lewis, as well as return to significant value to shareholders. This comes after the group began reviewing its businesses in these two markets last December. Meanwhile, CP Group operates across many industries ranging from industrial to service sectors.
Tesco began operations in Malaysia in 2002 under the name Tesco Malaysia, as part of a joint venture with Sime Darby. According to Tesco, its Malaysia operations generated about US$1.04 billion during the fianncial year ended 23 February 2019, and operates a network of 68 stores nationwide. The brand currently works with Mindshare and Mindmade in Malaysia. For Chinese New Year, it rolled out an integrated advertising campaign involving 21 commercials with relatable and funny storylines.
Meanwhile in Thailand, Tesco began its operations as in 1998 through Ek-Chai Distribution System which operates under the name Tesco Lotus. For the financial year ended 23 February 2019, Tesco Thailand generated about US$5.3 billion. It has 1,967 stores nationwide.
"I would like to thank all of 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," Lewis added.
Tesco is expected to return about US$6.6 billion in proceeds to shareholders via a special dividend. Following the disposal, Tesco will continue to be "a highly cash generative business with a robust and prudently managed balance sheet", the press statement said.
The sale will help Tesco become "a significantly more focused business" as a renowned brand in the UK and Ireland, the press statement said. The group also has a presence in Czech Republic, Slovakia, Hungary and Poland.
"The strategy will seek to create value for shareholders through maintaining and strengthening the competitiveness of the offer for customers across all the group’s markets. This will allow the business to continue to leverage its unique market position to generate an attractive and sustainable level of free cash flow," Tesco added.