Tesco sells Czech, Slovakia arms to Ahold Delhaize at EUR1.7 billion

Tesco PLC on Friday said it has agreed to sell its businesses in the Czech Republic and Slovakia to Dutch peer Ahold Delhaize NV for an enterprise value of EUR1.7 billion, as the UK's largest supermarket chain continues its retreat to its home market.

The sale excludes Tesco's business in Hungary, leaving this as the Welwyn Garden City, England-based company's only significant operation outside the UK and Ireland. But it said on Friday: "We will continue to review all options for the future of our business in Hungary."

Tesco will receive EUR1.2 billion in net cash from Ahold before tax and transaction costs. It said it will return a majority of the proceeds by means of an incremental share buyback. Tesco already is in the midst of a £950 million share buyback.

The two businesses being sold generate combined annual sales of £2.9 billion and the "majority" of the £115 million in adjusted operating profit reported by Tesco for its Central European region in the financial year that ended this past February, it said.

Their disposal, which is expected to be completed in the second half of 2027, is expected to be "broadly neutral" to earnings per share and the group's ratio of net debt to adjusted earnings, Tesco said.

"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," Chief Executive Ken Murphy explained.

During the 1990s and early 2000s, Tesco built up operations in 13 countries around the world. But with increasing losses from this sprawling operation, the company started selling, pulling out of the US and China, then South Korea and other countries.

For its part, Zaandam, Netherlands-based Ahold said the acquisition increases its scale in central and southeastern European, making it better able to compete. The purchase comes with 360 supermarkets and 14,000 employees.

In Czechia, the combination of Tesco stores with Ahold's own Albert chain will create the leading grocery retail brand by market share, the company said, bringing operating efficiencies.

"Albert has a long-standing track record of acquiring store estates and transforming them into its winning proposition," Ahold said. "It will bring proven execution capabilities to a new customer base across an expanded footprint."

Ahold also will become a "significant player" in Slovakia.

Ahold said it expects the combination to be EPS neutral in the first year after closing.

Tesco shares were up 1.3% to 537.80 pence on Friday morning in London. Ahold was up 1.4% to EUR32.98 in Amsterdam.

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