Tesco Could Close Fresh & Easy As Sale Talks Stall
Tesco is struggling to sell its floundering U.S. foray, Fresh & Easy, leading people familiar with the situation to suggest that the most likely outcome would be a closure or break-up of the California-based operation.
Tesco had been speculated to be nearing a deal with Ron Burkle’s Yucaipa, but the talks have stalled, according to two individuals cited by the Financial Times. One suggested point of contention: Tesco is looking for a clean break from the U.S. as it doesn’t want to retain liabilities for Fresh & Easy after a deal is struck.
Tesco could also announce that it is forming a joint venture in China with China Resources Enterprise, a state-controlled group that ownes the Vanguard and Ole grocery chains.
Shore Capital Analyst Clive Black noted that the prolonged time frame means that the company is continuing to incur losses from Fresh & Easy despite the fact that they would be treated as discontinued operations.
A partnership in China as well as the U.S. exit are part of chief executive Philip Clarke’s pledge to take a more disciplined approach to international growth. The Chinese venture represents a more economically sound decision as it would enable Tesco to continue to have a presence in the world’s most populous nation in a way that consumes less capital.
Tesco is expected to announce a whether it will merge its business in China with that of Vanguard, and retain a 20 per cent stake. If a deal is concluded, Tesco could pay hundreds of millions of pounds to the Chinese retailer, affecting 3,000 stores.
Stay tuned to AndNowUKnow for the latest on the situation.
