Tesco has agreed to sell its Czech Republic and Slovak operations to Dutch supermarket group Ahold Delhaize for €1.2bn (£1bn), marking the latest step in the retailer's retreat from its international expansion strategy.
The UK's largest grocer announced the deal on Friday, saying the transaction would allow it to sharpen its focus on the UK market, where retailers face pressure to keep prices down amid rising energy and supply chain costs.
Focus on Core UK and Irish Businesses
Tesco chief executive Ken Murphy said the sale would simplify the group and support continued investment in its core UK and Irish operations.
Murphy said: "It has been a privilege to serve customers and invest in colleagues, stores and supply chain in the Czech Republic and Slovakia and we are proud of what has been achieved over the past 30 years."
He added: "For Tesco, the transaction will further simplify the Group, increasing our focus on our core UK and Irish businesses and supporting our continued investment in our food-first retail ecosystem and the capabilities that will drive future growth, while enabling a further return of capital to shareholders."
Details of the Transaction
Ahold Delhaize, which operates 17 supermarket brands including Albert Heijn in the Netherlands and Food Lion in the US, is set to take control of Tesco's Czech and Slovak stores in the second half of next year.
Over the past year, Tesco's operations in the two nations generated £2.9bn in sales and the majority of the £115m operating profit delivered by its "central Europe" division. The retailer has 184 stores in the Czech Republic and 179 in Slovakia.
Tesco also runs 198 sites in Hungary, and reports earlier this year indicated it was looking for a buyer for that business. However, Tesco stated: "Hungary is not part of today's agreement and continues to be owned and operated by Tesco. We will continue to review all options for the future of our business in Hungary."
Strategic Shift and International Withdrawals
Frans Muller, chief executive of Ahold Delhaize, said: "This acquisition is an important step in strengthening our position in the Central and Southeastern European region."
He added: "It brings together highly complementary businesses with strong local market expertise and gives us the opportunity to expand into Slovakia, an attractive adjacent market."
Analysts at stockbroker RBC said: "We think that much of [Tesco's] value has been in the UK&I business in recent years, and central Europe has had its challenges and hence we are encouraged by the reduced exposure there."
Tesco's departure from the Czech Republic and Slovakia follows a series of international exits over recent decades, including France, Japan, Malaysia, Poland, South Korea, Thailand, Turkey and America.
The supermarket abandoned its US venture in 2013, offloading all remaining Fresh & Easy stores, while an accounting scandal in 2014 hastened its retreat. Tesco's Thai and Malaysian operations were sold for £8bn in 2020.
These moves have reversed the expansion strategy outlined by former Tesco chief executive Sir Terry Leahy, who declared in 2007 that the group was seeking to grow "everywhere". He had said: "We are on the threshold of becoming one of the few successful international retailers. There's plenty to do."
The group's European arm contributed £4.5bn of its £66.6bn total revenue last year and was recently described by Murphy as an "integral part of the group". Tesco shares rose one per cent in early trading, reaching 536p.
