Tesco shares escaped the dramatic falls suffered by the rest of the FTSE 100 this week, say John Reed and Jonathan Eley in the Financial Times. That’s because it agreed to sell its southeast Asian operations to Thai conglomerate Charoen Pokphand for £8.2bn in cash.
This will produce a “lavish” special dividend of £2.5bn; the remainder will be used to eliminate Tesco’s pension deficit. The deal, the biggest in Thailand’s history, sees Tesco return its 2,000 stores in Thailand and 74 in Malaysia to CP Group, who sold its Lotus supermarket group to Tesco for $180m during the Asian crisis.
There’s no doubt that the owner of CP Group “has got his hands on a fine business”, says Ben Marlow in The Daily Telegraph. Of all Tesco’s attempts at expansion overseas, Thailand “was far and away the biggest success”. What’s more, the sale not only represents a U-Turn from Tesco’s plans to add another 750 stores in Thailand, but it also leaves Tesco “focused almost entirely on the UK”, where growth is “elusive”.
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Nonsense, say Clara Ferreira Marques and Nisha Gopalan on Bloomberg. Not only did the Asian business amount to a “modest 9% of Tesco’s total revenue in the first half of last year”, but it also “needed investment” at a time when Thailand’s economy is “flatlining”.
Tesco also achieved a high price of 12.5 times earnings. The only concern is that Thai regulators may block the deal because it allows CP Group to grab “too much of the market”, so Tesco’s shareholders shouldn’t celebrate “until they get delivery”.
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