Tesco is considering selling its Thai and Malaysian stores after a recent approach by an unnamed buyer.
A sale would be highly significant because Tesco operates 1,967 stores in Thailand, and another 74 in Malaysia, employing more than 60,000 people.
Between them, the outlets made a profit of £286m in the most recent financial year – about one-fifth of Tesco’s total global profits.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
SUBSCRIBE & SAVE
Sign up for The Week's Free Newsletters
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Latest Videos FromThe Week
Therefore, says Shore Capital retail analyst Clive Black, any offer is going to have to be a “knockout” price for Tesco to “consider selling”.
Speaking to The Daily Telegraph, Black added: “Thailand in particular is a jewel in their crown and as recently as June, they were talking about expansion there with 750 new convenience stores over the next four years.”
Bernstein analyst Bruno Monteyne agreed, telling Reuters that Tesco’s Thai operation was a “high quality business” and still had significant growth opportunities.
–––––––––––––––––––––––––––––––For a round-up of the most important business stories and tips for the week’s best shares - try The Week magazine. Start your trial subscription today –––––––––––––––––––––––––––––––
However, writing for Bloomberg, Andrea Felsted argued that Tesco should “take the money and run”. Felsted said that despite the riches of its Asian wing, the “prices on the shelves of its domestic supermarkets are the key driver of the retailer’s fortunes”.
The BBC reports that Tesco has been “shifting its focus” as part of a turnaround programme launched five years ago. The change in focus has already seen it withdraw from the US, Japan and China.
In a statement, the company 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.”
Shares in Tesco were up 5.5% yesterday morning, valuing the retailer at £24bn, as analysts said rival retailers and private equity investors could be interested.
In October this year, Tesco chief executive Dave Lewis announced that he would stand down “in the summer of 2020”, surprising many.
