Supermarket giant Tesco is to lend Investment Company Yucaipa Companies £80 million to take the loss-making Fresh & Easy stores off its hands, marking the end of a six-year struggle to crack the U.S. market.
Tesco has confirmed Yucaipa will acquire over 150 of the California-based Fresh & Easy stores as well as its Riverside distribution and production facilities. Also 4,000 of Fresh & Easy’s 5000 employees will transfer to the new business as part of the deal.
The U.S. deal represents a further decline in Tesco’s international portfolio. In 2012 it withdrew from Japan and last month said it would fold its loss-making Chinese operation into a state-run business as a minority partner.
The sale is in line with the retailer’s new focus on the disciplined allocation of capital to those markets with considerable growth potential and the opportunity to deliver strong returns.
Following the completion of the full sale and transfer process, expected within the next three months, there will be no on-going financial exposure for the supermarket giant.
Tesco Chief Executive Philip Clarke explained that the sale will benefit all concerned.
He said; “The decision we are announcing today represents the best outcome for Tesco shareholders and Fresh & Easy’s stakeholders. It offers us an orderly and efficient exit from the U.S. market.”
However, Tesco’s overseas problems are not limited to the U.S. and China. In June the retailer reported that nine of its 11 international businesses suffered a fall in underlying sales.
The retailer also posted a fall in quarterly sales in its main British market, continuing a trend seen for most of the past three years and raising doubts about its £1 billion turnaround plan.
Shares in Tesco, up 6 per cent over the last year, closed on Tuesday at 372 pence, valuing the business at about £29.7 billion.
Yucaipa is a Los Angeles based private equity company, founded in 1986 by billionaire investor Ron Burkle.
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