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”.
Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
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