Tesco shareholders set for multi-billion payout after sale of operations in Thailand and Malaysia

Tesco has more than 3,700 stores across the UK and Ireland. Picture: Getty Images

The grocery giant said it will receive some £8 billion in cash proceeds and plans to hand £5bn of this to shareholders in a one-off dividend.

Tesco has agreed to sell the south-east Asian business to CP Group, Thailand’s biggest conglomerate presided over by Dhanin Chearavanont, the country’s second richest man.

In December, the UK group confirmed that it was pondering the disposal of its Asian operations as part of a strategic review and had been approached by a potential buyer.

Last month, Tesco also exited China after selling its stake in the Gain Land joint venture for £275 million.

The group said it received multiple offers for the Asian division and believes the disposal “will realise a significantly higher value than could be generated from Tesco’s continued ownership and investment”.

It said the deal, which is expected to complete in the second quarter of 2020, will “further simplify” the business and leave it only with operations in Europe.

The focus will now be on operations in the UK and Ireland, where Tesco has 3,769 stores, as well as its Eastern European division, where it has 895 sites.

Strategic review

Chief executive Dave Lewis, who has already announced plans to step down in the summer, said: “Following inbound interest and a detailed strategic review of all options, we are announcing today the proposed sale of Tesco Thailand and Tesco Malaysia.

“This sale releases material value and allows us to further simplify and focus the business, as well as to return significant value to shareholders.

“I would like to thank all of our Tesco Thailand and Tesco Malaysia colleagues for their dedication, professionalism and service to our customers, which has resulted in the creation of such a strong business.

“I am confident that the agreement we have reached with CP Group presents an exciting opportunity for their continued success.”

Analysts at Shore Capital noted: “Following this disposal, which we broadly welcome, noting though that Tesco is ‘losing’ a key growth strand, we reiterate our buy stance on the group’s shares.

“We have some modelling to do in order to bring the moving parts together, noting the balance of losing Asian Ebitda [earnings before interest, tax, depreciation and amortisation] with the special distribution, share consolidation and ongoing lower pension contributions. However, whilst all this is so, we like the idea of a capital disciplined Tesco.”

In January, Tesco said it had overcome a “subdued” consumer backdrop to scrape out a fractional increase in Christmas sales.

The firm said it had outperformed in a “challenging” market, delivering its fifth Christmas in a row of sales growth, albeit just 0.1 per cent in the latest period. But while UK same-store sales grew in the six weeks to 4 January, it saw a 0.2 per cent dip in the 19 weeks covering both the third quarter and festive period.

Lewis said: “In a subdued UK market we performed well, delivering our fifth consecutive Christmas of growth.”