Britain’s biggest retailer has concluded the sale of its South Korean arm Homeplus for a reported £4.2bn, as the ailing supermarket chain looks to double down on its domestic business and write off a significant chunk of its debt pile.
The supermarket chain, one of Britain’s “big four”, has struggled in recent years and months to arrive at a winning formula
The sale came courtesy of an Asian private equity group headed by MBK Partners, and is to date the continent’s largest private equity deal. The focus will fall now on “[Tesco’s] strategic priority of protecting and strengthening our balance sheet,” according to a statement, and the sale should enable the retailer to wipe billions of pounds from its net debt.
The supermarket chain, one of Britain’s “big four”, has struggled in recent years and months to arrive at a winning formula, with its profits squeezed by budget retailers on the one hand, and its reputation hit by an accounting scandal on the other.
Tesco’s debt pile, as of February, clocked in at a mammoth £8.5bn – and the deal should enable the supermarket chain to redeem outstanding debt payments, with a fair portion put aside to purchase the leases on a handful of stores. The Homeplus sale follows that of its video streaming service Blinkbox earlier in the year. However, the two are not enough to convince either Moody’s or Standard & Poors to rethink their decision to designate Tesco’s debt junk status.
The sale marks an expected move on Tesco’s part to balance its books, although the amount as it stands is not enough to convince rating agencies that the retailer will stabilise its finances anytime soon.