Tesco will raise £4.2bn from the sale of its Homeplus business to a consortium led by MBK Partners as it calls time on its South Korean operation.
- Tesco is selling the business to protect the balance sheet
- It represents Asia’s largest ever private equity deal
- The deal is expected to complete in the fourth quarter
South Korea-based MBK Partners has agreed to buy Tesco’s operation in conjunction with the Canada Pension Plan Investment Board, the Public Sector Pension Investment Board and Temasek Holdings.
The 900-store Homeplus business is Tesco’s largest business outside the UK and the deal represents Asia’s largest ever private equity deal.
Tesso will raise £4.23bn from the sale from net cash proceeds and associated reduction in capitalised lease and other commitments.
Net cash proceeds after tax and costs are expected to be £3.35bn.
It is understood Tesco boss Dave Lewis was eager to offload the business as soon as possible to shore up the grocer’s balance sheet after the value of the Korean won began to fall against the pound.
The retailer reported its biggest ever statutory loss of £6.38bn in April as Lewis battles to reshape its non-core asset portfolio and plug a £22bn debt.
The deal is expected to complete during the fourth quarter of this year, subject to Tesco’s shareholder approval and regulatory approval in Korea.
Lewis said: “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.
“I would like to thank all of our Homeplus colleagues for their dedication, professionalism and service to our customers, which has resulted in the creation of a great business.”
HSBC and Barclays acted as advisers on the deal.
Carlyle Group and a consortium of Affinity Equity Partners and KKR also entered bids for Tesco’s South Korean business.