Tesco's share price opened up this morning after revealing it has agreed to sell its South Korean arm Homeplus for £4.2bn to a consortium of investors, led by MBK Partners, the beleaugered supermarket has confirmed.
The consortium also includes the Canada Pension Plan Investment Board, the Public Sector Pension Investment Board and Temasek.
The deal, which was widely expected, will reduce Tesco's debt by £4.225bn, the retailer said. it comprises a cash consideration of more than £4bn before tax "and other transaction costs".
It is expected to be completed by the fourth quarter of this year "conditional on Tesco shareholder approval and regulatory approvals in the Republic of Korea".
Tesco's share price opened up 1.3 per cent on the news.
Chief executive Dave Lewis said: "After a highly competitive process, we are announcing today the proposed sale of Homeplus, our business in the Republic of Korea. This sale realises material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet.
"I would like to thank all of our Homeplus colleagues for their dedication, professionalism and service to our customers, which has resulted in the creation of a great business. I am confident that the agreement we have reached with MBK Partners presents an exciting opportunity for their continued success.”
HSBC Bank is acting as lead financial adviser and Barclays as financial adviser and sponsor to Tesco through its investment bank arm.
Tesco has been looking to exit the country as one of its many cost-cutting measures, which Lewis is hoping will get the company back on track after its profts black hole revealed last year.
Korea made up around nine per cent of Tesco's total sales last year. However, Homeplus sales have been in decline since 2011, dropping four per cent last year, in part because of restrictions around opening hours for hypermarkets.
Tesco is not the only retail giant to pull out of the country: Wal-Mart Stores Inc. and Carrefour SA have also exited South Korea in the last few years. Tesco first entered the country in 1999.
4 September 2015 @ 4:30pmTesco (TSCO)