Struggling Tesco expected to unload
Cost cuts, asset sales and write-downs in works for troubled company
Tesco may sell its business in Thailand as part of its cost cuts, asset sales and write-downs to revive the troubled British grocer’s fortunes, according to Reuters.
New boss Dave Lewis is expected to focus on cost cuts and asset sales when he provides an update tomorrow on his plans, the news agency reported.
Lewis could signal that Tesco is exploring the possible sale of its data analytics business Dunnhumby, estimated by analysts to be worth between 2 billion and 3 billion pounds.
Other possible disposals include its Thai business. Valued by analysts at about 5 billion pounds (Bt250 billion), the operation has already drawn the interest of Charoen Pokphand Group, Thailand’s largest agribusiness conglomerate.
The group owns more than 40 per cent of CP All, the operator of 7-Eleven convenience stores in Thailand. The group is also a major shareholder of listed cash-and-carry wholesaler Siam Makro.
In 1994, CP Group founded Ek-Chai Distribution System, which now operates more than 1,400 stores in Thailand, including 1,100 Express stores. Ek-Chai was sold to Tesco in 1998.
Tesco is also expected to dispose of its South Korean business, with an estimated value of around 4 billion pounds, and the possible dilution of its stake in Tesco Bank.
Peripheral operations, such as video-streaming business Blinkbox, are expected to go but will not raise much cash. TalkTalk is in advanced talks to buy Blinkbox, according to a source.
Cantor Fitzgerald analyst Mike Dennis reckons Tesco could signal 4 billion pounds of asset sales, a 2-billion-pound write-down on British land and existing super-markets, head-office closure savings of 250 million pounds and annual cost reductions of 500 million pounds.
Britain’s biggest retailer, reeling from an accounting scandal and four profit warnings that halved its share price last year, could also detail substantial property asset write-offs to reflect the diminishing value of large out-of-town stores and development land, analysts have said.
