Tesco has sold its South Korean business, Homeplus, for £4.2bn as part of its ongoing effort to strengthen its balance sheet.
The supermarket chain plans to use the proceeds of the sale to pay down its debts and invest in its UK business, which has been in trouble recently following increased competition from budget stores and an embarrassing accounting scandal.
Tesco reported a record pre-tax loss of £6.4bn for the year to February, compared to an annual pre-tax profit of £2.26bn a year earlier.
Homeplus was Tesco’s largest overseas unit, but the business had recently slowed down in response to new South Korean regulation designed to help smaller stores compete against supermarket chains
South Korean private equity firm MBK Partners has collaborated with Singapore’s sovereign wealth fund Temasek Holdings and Canadian pension fund Canada Pension Plan Investment Board, on the deal.
Dave Lewis, chief executive of Tesco, commented:
“This sale realises material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet.”
The sale is expected to be completed before the end of the year and will produce £3.35bn in cash for Tesco after tax and other costs.
