Tesco Plc agreed to sell its supermarket arm in Czech Republic and Slovakia to Ahold Delhaize for an enterprise value of €1.7 billion. Britain's largest supermarket said the sale allows it to focus on its core UK and Irish businesses. Tesco expects to return about €1.2 billion of proceeds to shareholders after tax and other costs. The deal effectively marks the end of Tesco's previous plan to become a global grocery giant.
Tesco used to have a significant overseas empire including large operations in South Korea, Thailand, Malaysia and Central and Eastern Europe. Its attempt to break into the US market was considered an expensive failure. Since 2014, Tesco has been gradually selling off overseas divisions to focus on the UK and Ireland markets. Tesco first entered the Czech Republic and Slovakia about 30 years ago and is considered to have transformed grocery retailing there by introducing large hypermarket-style supermarkets.
However, in its annual report this year, Tesco said profit in its continental European operations had fallen as a result of greater competition in Slovakia and ongoing regulatory pressure. It still has a grocery business in Hungary, that has been loss making in recent years and is not included in this sale. Tesco said it's reviewing the future of the Hungary unit.
Ahold Delhaize is one of the world's largest grocery retailers. The Tesco acquisition will further bolster its presence in Central and Eastern Europe. In the Czech Republic, Ahold already operates the Albert supermarket chain and combined with Tesco Czechia it will likely become the leading grocery retail brand by market share. The deal should complete in the second half of next year, marking a major return to the Slovak market for Ahold.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing