Tesco completes exit from China

Britain’s biggest retailer Tesco has completed its exit from China with the 275 million pound ($357 million) sale of its joint venture stake to state-run partner China Resources Holdings (CRH).

Having struggled to crack the Chinese market, Tesco established the Gain Land venture with CRH in 2014, combining the British group’s 131 stores in China with its partner’s almost 3,000.

The disposal of its 20% stake allows Tesco to further simplify and focus the business on core operations, it said on Tuesday, adding that the proceeds will be used for general corporate purposes.

The deal is scheduled to complete on Feb.28.

Shares in Tesco were up 0.7%, extending its gains over the last year to 12.4%.

“This extra 275 million pounds of ‘forgotten value’ should be accretive to most street valuations,” said Bernstein analyst Bruno Monteyne.

After costly exits from Japan and the United States and the sale of its South Korean business, Tesco signalled in December a further retreat from its once lofty global ambitions by starting a review of its operations in Thailand and Malaysia - its last remaining wholly owned businesses in Asia.

A sale of its operations in Thailand and Malaysia would mean Tesco’s only remaining overseas operations, apart from Ireland, would be its central European division, comprising stores in the Czech Republic, Hungary, Poland and Slovakia.

The Asian exit could be one of the last acts of Tesco CEO Dave Lewis, who will be succeeded by Ken Murphy in October. Bernstein’s Monteyne expects Tesco to start a 1 billion pound share buyback programme in its 2020-21 financial year.

“With this transaction and the possible sale of Thailand and Malaysia, Tesco’s biggest short-term concern could be how to efficiently return cash to shareholders,” he said.

Reuters