Tesco mulling sale of stores in Thailand and Malaysia | Progresiv
Tesco has confirmed that it is considering the sale of its stores in Thailand and Malaysia, which would bring to an end its presence in Asia and provide a major cash boost to the business. 
Press peports over the weekend suggested Tesco was working with an adviser for a sale of the operations that could be worth up to 9 billion dollars. A sale process may start early next year, although sources stated that the plans were at a preliminary stage and a deal might not materialise. Possible buyers could include family-owned conglomerates or private equity investors.
Tesco later confirmed that, following inbound interest, it had commenced a review of the strategic options for its businesses in Thailand and Malaysia, including an evaluation of a possible sale.
The statement added: “The evaluation of strategic options is at an early stage, no decisions concerning the future of Tesco Thailand or Malaysia have been taken, and there can be no assurance that any transaction will be concluded. A further announcement will be made if and when appropriate.”
In order to focus on combating the discounters and online rivals in its domestic market, Tesco has been shrinking its activities overseas in recent years. Since 2011, it has exited markets including the US, Turkey, Japan, South Korea, and China.
The group’s Tesco Lotus unit now operates nearly 2,000 stores in Thailand, many of which are convenience outlets. Reports suggested that the Thai business could be valued at nearly 7 billion dollars as it includes property assets. Meanwhile, Tesco has 74 stores in Malaysia that could be valued at up to 2 billion dollars.
Tesco recorded poor performance in its Asia division last year, with turnover falling 4.1% to 4.87 billion pounds and like-for-likes plummeting 6.2%. Operating profits were also down 6.7% to 286 million pounds, held back by the weak sales and investment in prices, promotional activity, and changes to the sales mix.
However, the group has claimed that strategy changes are now starting to drive improved sales performance, whilst profits are benefitting from recent renegotiations with its suppliers and the restructuring of its store and office operations in Thailand.
Back in June, Tesco stated that it was planning to step up its expansion in Thailand by opening 750 new stores over the next three years and refresh existing outlets. Announcing the move, CEO Dave Lewis described the economics of the country as “very attractive. There is a big emerging middle class.”
A sale would provide a major cash boost for Tesco which could be used to improve its position in the UK.
If Tesco does leave Thailand and Malaysia, its only overseas operations, apart from Ireland, will be its loss-making Central Europe division, consisting of stores in Hungary, Poland, Slovakia, and the Czech Republic. (www.kamcity.com)
