Tesco to sell Korean unit to MBK consortium for £4.24bn

7th Sep 2015 07:20

(ShareCast News) - Supermarket retailer Tesco has agreed to sell its South Korean unit, Homeplus, to a group of investors led by MBK Partners for £4.24bn.The consortium includes Canada Pension Plan Investment Board, Public Sector Pension Investment Board and Temasek Holdings Limited.Tesco will receive a total of £4bn in cash before tax and other transaction costs from the sale and said the deal, which is expected to complete in the fourth quarter, will allow the company to significantly reduce its £4.23bn debt.Chief executive Dave Lewis said: "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 am confident that the agreement we have reached with MBK Partners presents an exciting opportunity for their continued success."Societe Generale, which rates the stock at 'hold', said the deal was done at a good price which was not far from the estimate in its NAV calculation."While the disposal will help improve the group's financial leeway, the balance sheet should remain stretched," it said. "The key priority to create value for shareholders is to improve fundamentals," it added.Shore Capital, which also rates the stock at 'hold', said: "The announcement is broadly neutral for the Tesco investment case, with the positive reduction in the group net indebtedness a further staging underpinning the ongoing good work around more sustainable working capital and capital investment requirements, which should lead to a materially strengthened balance sheet over time."However, it said this was at the expense of one of Tesco's "crown jewels", which it estimated would have contributed 15-20% of group earnings before interest, tax, depreciation and amortisation in full-year 2016.At 1530 BST, Tesco shares were down 0.2% at 185.65p.