Tesco’s plans to raise £2bn through the sell-off of DunnHumby have been blown out of the water after those bidding for the business have slashed in half what they are prepared to pay for the data giant.
Some observers have long thought the £2bn valuation was optimistic at best – after all, Tesco only paid just over £100m for the company.
But, according to Sky News sources, it was the end of the deal with US retailer Kromer which has slashed the firm’s earning potential. In what is a double irony, Tesco wanted out of the Kroger partnership because it would have restricted DunnHumby’s potential US market.
One Sky source said that pre-tax profits had halved to approximately £70m as a consequence of the restructured contract, while others suggested that the fall was not as sharp as a 50% decline.
In January, Tesco appointed Goldman Sachs to “explore strategic options” for DunnHumby, initially saying it would retain a share in the firm. However, it is understood the fall in value has triggered yet another rethink with Tesco insider saying the retailer is now open to offers for the whole business.
The move will be a major blow to chief executive Dave Lewis, who would have been hoping for a bidding war, with interested parties ratcheting up their offers to get their hands on what is one of the most respected data companies in the world.
A hatful of businesses have expressed an interest, albeit privately, including WPP and US-based buyout firm Clayton, Dubilier & Rice – which is advised by former Tesco chief Sir Terry Leahy – Advent International, General Atlantic Partners, KKR, and the company which financed Dell’s sell-off, Silver Lake Partners. Experian is also taking a close interest.
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