Tue, Dec 10, 2019 page10

• Tesco considers sale of Thailand, Malaysia units

  PROTECTING ITS CORE: The sale would give Tesco cash to continue restructuring its UK operations, even though it would lose the fastest-growing part of its operations

  • Bloomberg
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  Britain’s biggest supermarket chain, Tesco PLC, is considering the sale of its operations in Thailand and Malaysia as it refocuses on its domestic business amid mounting challenges in the core UK market.

  The company is carrying out a strategic review of the businesses after receiving what it called inbound interest, it said in a statement on Sunday.

  The deal could value the operations at as much as US$9 billion, Dow Jones reported earlier, citing people familiar with the plan.

  

  Tesco PLC chief executive officer Dave Lewis speaks at an analyst presentation in London on April 12, 2017.

  Photo: Reuters

  Tesco spokesman Simon Rew declined to comment on the valuation.

  “The evaluation of strategic options is at an early stage, no decisions concerning the future of Tesco Thailand or Malaysia have been taken,” the statement said, adding that the process could end without a transaction being concluded.

  While a sale would mean losing the fastest-growing part of its operations, Tesco would receive an infusion of cash to continue the restructuring of its core UK operations that has seen thousands of job cuts and a shift to new formats such as checkout-free stores.

  It would also allow the British retailer to exit from a competitive Asian region that has already stymied the likes of European peers such as Carrefour SA.

  Tesco Thailand is the biggest hypermarket chain in the country with 1,967 stores, while the Malaysian business has 74 stores.

  The Thai business alone could be valued at nearly US$7 billion, because it includes real-estate assets, Dow Jones reported.

  In the first half of fiscal year 2020, the retailer’s entire Asia business produced ￡2.6 billion (US$3.4 billion) of revenue, accounting for about 8 percent of total sales.

  While still dominant in Thailand, Tesco is grappling with challenges such as chronically weak consumption trends, an increasingly stringent regulatory environment, and “formidable, well-connected competition,” said Maria Lapiz, head of research at Maybank Kim Eng Securities (Thailand) Pcl.

  “There is no longer term growth here, and Tesco may want to rationalize its business and raise funding in the process as well,” she said.

  Under outgoing chief executive officer Dave Lewis, Tesco streamlined its domestic operations with mass job cuts, and pulled back from some international markets.

  Ken Murphy, who is to replace Lewis, will have to wrestle with a growing UK retail crisis exacerbated by Brexit, the shift to online shopping and competition from discounters Lidl Stiftung & Co and Aldi.

  Tesco is likely to see acquisition interest from regional conglomerates that have been successful in combining local operation know-how with the cache of international brands. In Malaysia, Japanese retail giant Aeon Co acquired Carrefour’s operations in 2012 for US$276 million.

  Thai conglomerates such as Central Group and the Singha Corp are potential buyers that could be drawn to Tesco’s large retail network in the country, Lapiz said.
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