Tesco completes Asia sale to CP Group

Date : 18 December 2020

Nick Gladding

Senior Retail Analyst

Tesco has confirmed it has completed the divestment of its operations in Thailand and Malaysia to CP Group. The sale follows regulatory clearance from the Thai and Malaysian competition authorities.

CP Group strengthened by Tesco deal

CP Group operates across many industrial and service sectors. Its retail arm, CP Food combines vertically integrated agriculture and manufacturing of products across 17 markets. It is already the grocery market leader in Thailand through CP ALL, where it also operates wholesaler Siam Makro, online via ‘24 Shopping’, mini market format CP Fresh Mart as well as the franchise to operate c.11,000 7-Eleven convenience stores in the country.

We estimate that the Tesco Asia acquisition will boost CP Group’s market leading share in Thailand to 23.1% while also giving it a presence in Malaysia where it will become the third largest player.

Proceeds to shareholders and to improve pension fund

The deal allows Tesco to return c.£5bn of net proceeds to shareholders via a special dividend, together with a share consolidation. Tesco will also make a £2.5bn contribution to its pension scheme following completion of the deal. The payment of the dividend has been facilitated by Tesco’s decision last week to forgo £585m in business rates relief received from the UK government and devolved administrations.  

Tesco’s focus reverts to core European business

Reflecting on the retailer’s experience in Asia, Tesco Group CEO Ken Murphy said “I would like to thank all our colleagues in Asia for their hard work and dedication to our customers over many years. They have built a very strong business. I’m confident that the agreement with CP Group will ensure that they are well setup for continued success. This sale allows us to focus on our businesses across Europe and to continue delivering for customers, make a significant contribution to our pension deficit and return value to shareholders.”

Polish divestment imminent

With the Asian business divested, Tesco will be keen to complete the planned sale of its 301 stores in Poland to Salling Group’s Netto business. This was agreed in June and is currently undergoing regulatory scrutiny. A decision is expected by the end of 2020.

Once Poland has been divested, Tesco will be left with retail operations only in the UK, Ireland, Czech Republic, Hungary and Slovakia.

Strategic outlook for Tesco 2020

In the new edition of this report, released today, we assess Tesco’s progress as the need to ensure ‘food for all’ and ‘safety for everyone’ during the pandemic takes precedence over long term strategic aims. We also present our forecasts to 2022 as Tesco withdraws from non-core markets and focuses more on the UK under new CEO Ken Murphy.

Subscribers can access the report here