Tesco superstore in Kutná Hora, Czech Republic, July 2023. Archive photo: Realeklas / Wikimedia Commons, CC BY-SA 4.0. Cropped; adapted photo under the same license.
Tesco has agreed to sell its businesses in the Czech Republic and Slovakia to Ahold Delhaize in a deal valued at €1.7 billion including lease liabilities, the companies announced Friday.
The proposed sale covers all of Tesco’s stores and offices in the two countries, together with distribution centers in Kralupy, Presov and Beckov. Hungary is excluded and will remain owned and operated by Tesco.
Tesco said the transaction would simplify the group and sharpen its focus on its core UK and Irish businesses. For Ahold Delhaize, the purchase would expand its Czech business and bring it into neighboring Slovakia.
More than 360 stores and 14,000 employees
The Czech and Slovak operations include more than 360 company-operated supermarkets, hypermarkets and convenience stores, plus more than 100 franchise stores, according to Ahold Delhaize. They generate approximately €3.5 billion in sales and employ more than 14,000 people.
Ahold Delhaize already operates the Albert grocery brand in the Czech Republic. The buyer said it expects the combination of Albert and Tesco’s Czech business to become the country’s leading grocery retail brand by market share after completion, integration and changes to the store portfolio. That is the company’s expectation, not a completed market position.
The companies have not completed the sale. Tesco said the businesses would remain part of its group until closing, with serving customers and supporting employees remaining its priority.
Lease accounting explains the two deal values
The €1.7 billion headline enterprise value includes lease liabilities under IFRS 16 accounting. Excluding those leases, the companies put the enterprise value at approximately €1.2 billion. Tesco expects €1.2 billion in net cash proceeds before tax and other transaction costs.
Tesco plans to return most of the net proceeds to shareholders through an additional share buyback after completion. It said the transaction would be broadly neutral to earnings per share and its net-debt-to-EBITDA ratio once that buyback is completed.
Ahold Delhaize said it would fund the acquisition through committed financing and existing resources. It expects the business combination to be earnings-per-share neutral in the first year after closing.
Regulatory approval still required
The deal requires antitrust and other regulatory clearances. Tesco expects completion in the second half of 2027; Ahold Delhaize gives the more specific target of the fourth quarter of 2027.
“For Tesco, the transaction will further simplify the Group, increasing our focus on our core UK and Irish businesses,” Tesco Chief Executive Ken Murphy said in the announcement.
Tesco said it would continue to review all options for the future of its Hungarian business. That business is not included in the agreement announced Friday.
JBizNews Business Desk | LONDON / ZAANDAM
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