Retail giant Tesco could gain around US$9 billion by selling off its Asean businesses, according to a former supermarket chief.
Shares in the supermarket chain rose by more than 5 per cent during trading after Tesco said it was considering offloading more than 2,000 of its stores in Thailand and Malaysia following “inbound interest” from a potential buyer.
Laura Lambie of Investec Wealth and Investment said Thailand remained an important market for Tesco.
While Tesco had already withdrawn from “more mature markets”, such as the US, Japan and Turkey, it had recently announced plans to open another 750 stores in Thailand, she said.
Margins in Thailand were higher, at 6 per cent, compared with 3 per cent in the UK, Lambie said. “There will have to be a fairly high asking price for Tesco to be prepared to let it go,” she added.
Former Tesco executive Bruno Monteyne, an analyst at investors Bernstein, said: “A valuation of £6.5 billion to £7.2 billion seems a fair valuation for an unsolicited proposal.”
Tesco has withdrawn from the US, South Korea and Japan in the last 10 years.
It has about 300,000 staff in Britain and is the biggest private-sector employer with group-wide sales of £56.9 billion last year. This includes almost £5 billion in Thailand and Malaysia, where it has more than 2,000 stores and approximately 60,000 employees.
The firm said: “The evaluation of strategic options is at an early stage, no decisions concerning the future of Tesco Thailand or Malaysia have been taken and there can be no assurance that any transaction will be concluded.”
In Thailand, Tesco owns the Lotus hypermarkets and convenience stores, facing competition from CP All, which runs the ubiquitous, non-closing 7-Eleven chain, Big C and the Japanese Family Mart. Just in June Tesco was expressing mid-term opportunities for 750 extra Thai convenience stores.
Tesco’s only other non-UK stores are in Ireland and Central European states like Poland and Hungary.
Carrefour, the French supermarket chain, sold its Thai operation at a double-digit multiple in 2010.
Tesco’s South Korea stores sold for £4.2 billion in 2015.
Clive Black of Shore Capital said the Tesco Lotus chain was “very valuable” as it was the “number one player” in Thailand. “Expect it to be nosebleed territory,” he said in reference to the possible final price.
A transaction would be expected to provide a major return for Tesco shareholders.
A statement from Britain’s largest supermarket chain said: “Tesco confirms that, following inbound interest, it has commenced a review of the strategic options for its businesses in Thailand and Malaysia, including an evaluation of a possible sale of these businesses.”
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