Tesco shares jump on potential Asian Supermarket sale

Tesco PLC (LON: TSCO) have seen their shares jump on Monday morning after the firm was considering the sale of its Asian supermarket business.

Shares of Tesco jumped 4.61% to 243p. 9/12/19 10:28BST.

Tesco have seen a mixed trading year, as the firm saw slow sales growth in its first quarter as reported in June.

The FTSE100 listed firm said that like-for-like sales increased 0.4% year-on-year in three month period until 25 May.

At the end of October, Tesco additionally announced that they would be set to trial the ClubCard Plus in an attempt to stimulate business.

Tesco, in similar nature to rivals such as Sainsbury’s have seen their trading hampered by stiff competition from overseas competitors such as Lidl and Aldi, which led to the firm agreeing a wholesale deal with Australian firm Coles.

Also noteworthy, Marks and Spencer reported a slump in their quarterly profits in October, and this led to mass store closures and saw their shares in red.

Today, Tesco the largest UK supermarket chain has considered selling its Asian operations which was reported by the Times.

The Asian grocery business, comprised of operations in Thailand and Malaysia, could be worth up to $9 billion, the Times said.

In a statement, the retailer said it had had received “inbound interest”, but did not name the potential buyer or buyers. Tesco Lotus employs about 60,000 people.

The business boasted revenues of £4.9 million in the year ending in February – making a profit of £286m – about a fifth of Tesco’s total global profits.

Clive Black, an analyst at Shore Capital, said the Asian operation was a “trophy asset”, and was likely to achieve a knock-out price.

A valuation of £6.5 billion to £7.2 billion seemed “fair”, according to Bruno Monteyne, analyst at Bernstein.

If a sale does go ahead it would mean the company would be left with stores in the UK and Ireland, and an unprofitable division in central Europe. That unit covers the Czech Republic, Hungary, Poland and Slovakia.

Tesco has been shifting its focus as part of a restructuring plan launched around five years ago.

This change was sparked by an accounting scandal and stiff overseas competition. The firm has lost several businesses across the world in recent times, and another may be heading that way.

It will be interesting to see how Tesco respond to this potential takeover, however shareholders will be pleased as reflected in this morning’s stock price movement.

The firm said in a statement: “Tesco confirms that, following inbound interest, it has commenced a review of the strategic options for its businesses in Thailand and Malaysia, including an evaluation of a possible sale of these businesses.”

It 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.”

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