DunnHumby sell-off close to collapse

Tesco’s plans to flog data division DunnHumby are on a knife’s edge following reports that WPP is the only company still interested in buying the business, whose value has crashed in recent weeks.
According to Sky News, Tesco boss Dave Lewis will hold talks with advisers later this week about whether to proceed with a sale. In January, Tesco appointed Goldman Sachs to “explore strategic options” for the division.
All the private equity firms which had expressed an interest – including General Atlantic, Permira with Google; and Apax Partners and CVC Capital – have now withdrawn.
With only Sir Martin Sorrell still hanging on, it has been suggested that Tesco will have little room to negotiate for a top-end price; the data company’s value has already been slashed from £2bn to £700m, with no prospect of a bidding war.
This was triggered by the loss of DunnHumby’s biggest US client Kroger and a clause which forces the successful bidder to renegotiate its Clubcard contract within five years.
According to one report, in the year to February, DunnHumby recorded sales of about £440m including Kroger, and close to £350m excluding that contract. Pre-tax profits were £60m without Kroger, with Clubcard currently accounting for more than half of the data firm’s revenues.
However, Tesco insisted that DunnHumby could build sales to nearly £1bn and profit to almost £200m on the back of new client contracts by 2020, according to the insider.
The pressure to dispose of the business was eased by the recent sale of Tesco’s South Korean operation, HomePlus, in deal worth £3.35bn to the company.
According to insiders, no decision had yet been made about DunnHumby’s future, but it is understood Lewis is keen to put the issue to bed within days. It is believed that WPP could still strike a partnership deal with the business, however.