Tesco’s Turkish unit sells 95.5 percent of shares to Migros
ISTANBULTesco’s subsidiary in Turkey, Kipa, has agreed to sell 95.5 percent of its shares to rival supermarket chain Migros for 302.3 million Turkish Liras ($104.33 million), it announced June 10.
In a statement to Borsa Istanbul, the companies said the transaction would be subject to regulatory approval.
“The mentioned amount will be subject to a price adaptation that will be made in accordance with balance sheets on the date when the transfer of shares will be undertaken after the required competitive approvals are secured and other conditions are met,” added the statement.
The British retailer has 173 Kipa stores in Turkey and posted a net loss of 574 million liras in the 2014-2015 financial year.
In July 2015, Turkey’s Anadolu Holding acquired a 40.25 percent stake in Migros Turkey. Anadolu Group Chairman Tuncay Özilhan recently became the chain’s chair as well.
After confirmation of the sale, Tesco Kipa’s shares slumped around 19 percent on Borsa Istanbul, although Migros shares increased by around 6 percent in the morning session on June 10.
“The sale of Kipa reflects the particular strategic challenge we have faced in Turkey as a small regional player in a highly competitive market,” said Tesco CEO Dave Lewis, who has been reshaping the company significantly, as quoted by Reuters. “It removes the need for the sustained investment required to enable the business to compete independently.”
Lewis joined Tesco in 2014 when the firm was in crisis, its profits battered by market share losses at home to discounters Aldi and Lidl. A damaging accounting scandal was then uncovered shortly after his appointment.
Last year, he sold Tesco’s South Korean arm for $6.1 billion, which means the firm now only has overseas businesses in Thailand and Malaysia, Central Europe and Ireland, according to data compiled by Reuters.
Under the previous management, Tesco made costly exits from Japan and the United States, and reduced its exposure to China.
“Although this was largely expected and is very small [Kipa made up less than 1 percent of group sales in 2015-16] it demonstrates the willingness and ability of management to exit non-core operations,” said UBS retail analyst Ben Gorman, as quoted by Reuters.
Tesco also said it planned to sell the Giraffe restaurant chain to Boparan Restaurants Holdings. The sale includes 54 standalone restaurants, of which 12 are franchise sites, and three restaurants within Tesco stores. No price was disclosed.