Tesco PLC (Tesco) announces today that it has entered into an agreement to sell its French subsidiary, Catteau, to the French food retailing group, Promodes S.A. (Promodes). The sale, which is subject to approval from the European Commission, is for FFm 2510 (under current exchange rates approximately £253m). At this price, the transaction recovers our investment prior to transaction costs and exchange rate movements. The agreement excludes the Tesco Vin Plus store at Cite d'Europe in Calais, which will be retained by Tesco, as it is a separate operation serving predominately UK customers.
Terry Leahy, Chief Executive of Tesco, said:
"The Board recognised that the opportunity to develop a large scale business in France was unlikely to be realised under the current environment where planning permission is difficult and acquisition valuations are high. Therefore, Catteau was becoming less strategically important and we decided to accept a good offer from Promodes.
We are recovering the value of our investment in Catteau and recognise that the experience we have had has been useful as we develop further internationally. The Board believes that this is also good for Catteau as it will benefit from the strength of Promodes being a large scale French retailer. I am grateful for the continuing commitment of the Catteau staff.
The sale also reflects the Board's increased strategic focus on emerging markets in Central Europe. There we see significant opportunities for organic growth of hypermarkets. We are contracted on 16 Central European sites which would provide around 1.5 million square feet of new retail space. We have already opened 2 hypermarkets (in Budapest) and will open a further 6 next year."
Tesco originally acquired a controlling interest in the Catteau operation in 1993, which was increased to full ownership in 1994. In the year to 31 December 1996, Catteau generated net sales (excluding VAT) of FFm 4,620 (£578m) and contributed an operating profit of FFm 86 (£10.8m). Catteau operates 105 stores with a total sales area of approximately 1.4 million square feet.
Tesco have been advised by Goldman Sachs on this transaction.