Thai Conglomerate, CP Group buys Tesco’s Asian assets for US$10.6bn

ASIA – Tesco has accepted a US$10.6 billion bid for its Asian businesses from a consortium of companies controlled by Thai billionaire Dhanin Chearavanont.

The deal, which remains subject to regulatory approval and Tesco Group shareholder approval, will be completed in the second half of this year, according to RLI.

The price represents an earnings multiple of 12.5 times and marks a significant premium on analysts’ estimates of the business being worth about $9 billion.

 The CP Group entities which will buy the assets – Tesco Lotus in Thailand and a joint venture with Sime Darby in Malaysia – are CP Retail Development Company, Charoen Pokphand Holding Co, CP All Public and CP Merchandising Co.

Assuming shareholder approval for the deal, Tesco plans to return around £5 billion (US$6.59 billion) to shareholders via a special dividend.

“This sale releases material value and allows us to further simplify and focus the business, as well as to return significant value to shareholders,” said outgoing Tesco CEO Dave Lewis.

In a statement, Tesco said the disposal will “further de-risk the Tesco business by reducing indebtedness through a £2.5 billion pension contribution (in the UK).

The statement further noted that the sale along with other measures, is expected to eliminate the current funding deficit and significantly reduce the prospect of having to make further pension deficit contributions in the future.

The Charoen Pokphand Group is a s Thailand’s largest private company and one of world’s largest conglomerates.

CP Group consists of three core businesses that operate in agribusiness and food, retail and distribution, and the telecommunications industries with investments in over 21 countries.

The conglomerate which employs over 300,000 people, owns controlling stakes in Charoen Pokphand Foods (CPF).

CPF is the world’s largest producer of feed, shrimp, and a global top three producer of poultry, pork, among other agricultural produces.

The group also operates Southeast Asia’s largest retail business by revenue, with over 10,000 Seven Eleven stores and a leading cash and carry business through Siam Makroemploying over 300,000 people.

Tesco is the third-largest retailer in the world measured by gross revenues and the ninth-largest retailer in the world measured by revenues.

It has shops in seven countries across Asia and Europe, and is the market leader of groceries in the UK (where it has a market share of around 28.4%), Ireland, Hungary and Thailand. Tesco pulled out of the US in 2013, but has continued to see growth elsewhere.

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