Tesco to sell failing Polish business to Danish Retailer

British-based supermarket Tesco has agreed to sell its business in Poland to Danish retailer Salling Group as they prepare to switch focus on a domestic market ravaged by coronavirus.

The deal, valued at £181 million (€199.7 million), will add a fleet of outlets to Salling, who already operate 380 Netto stores in Poland.

Tesco expects to sell 301 stores in total, following the sale of 22 other sites in Poland totalling £200 million (€221 million) over the past year and a half.

Tesco heads also announced that a further 19 stores not covered by the agreement are to be sold.

The company’s shares rose by as much as 1.2% early Thursday in London.

Tesco chief executive Dave Lewis says the agreement will enable it to concentrate on its wider Eastern European business, which covers Hungary, Slovakia and the Czech Republic.

He said: “These countries have stronger market positions with good growth prospects and achievement margins, cashflows and returns which are accretive to the group.”

Lewis, who is due to retire from the position in October, thanked the firm’s 7,000 employees for their dedication to serving customers in Poland over many years.

He added: “We see this transaction as the best way to secure the future of the business for our colleagues and customers in Poland.”

Tesco’s Polish business has struggled amid increasing competition, especially regarding general merchandise, and a large reduction in in-store opening hours. The company has been scaling back its overseas presence in recent years, including pulling out of the US in 2013 and South Korea in 2015.

Last year, Tesco Polska sold £1.37 billion (€1.51 billion) worth of goods, running on an operating loss of £24 million (€26.5 million), as the grocers spent much of that time selling its Polish property holdings.

Once Covid-19 kicked in, they further sold its operations in Thailand to Charoen Pokphand Group for £10.6 billion (€11.7 million) in a deal that will fund large cash returns to shareholders.

Salling SEO, Per Bank, said the deal enables them to consolidate Netto’s presence in a growing market and thus deliver on [their] group strategy.

He said: “With the acquisition of Tesco Poland, we are doubling our business in the country and we will become a significant player. The foundation for us to make such a large and strategically important acquisition is that we run a healthy and solid business.

“Covid-19 creates a natural uncertainty, but our business stands strong and enables us to act when the right opportunity arises.”

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