Tesco’s disastrous performance – and boss Dave Lewis’ refusal to raise cash through a rights issue – is piling the pressure on the retailer to hive off its assets, with DunnHumby at the top of the potential “for sale” list.
The data business is one of many parts of the business whose future is under scrutiny; others include Blinkbox (bought in 2011 for an undisclosed sum but understood to be loss-making); restaurant chain Giraff (snapped up for £48.6m last year); coffee shop Harris + Hoole (Tesco bought a 49% stake in 2013); and Dobbies garden centres (bought in 2007 for £155m).
But DunnHumby is by far the most valuable, with a price tag of £2bn. It has already been claimed that US private equity buyout specialist TPG has had one bid for the company rejected, but some industry analysts believe any new bid could be, in the words of Godfather Don Corleone, “an offer it can’t refuse”.
Set up by husband and wife team Clive Humby and Edwina Dunn in 1989, the business now employs more than 2,000 people in 30 countries.
Tesco originally invested in the firm in 2001, buying a 53% stake for a reported £30m, upping its stake and then taking full control. It is thought to have paid just over £100m for the business in total; Dunn and Humby finally stepped down early last year. Its latest accounts, for 2013, show a pre-tax profit of £67.6m on sales of £165m – a year when it paid Tesco a £140m dividend.
Tesco could still use DunnHumby as a supplier – and pocket the £2bn – but it would make it much easier to abandon the Clubcard scheme, estimated to cost the retailer more than £500m a year to operate.
DunnHumby’s original work on Clubcard is widely credited with turning Tesco into the retailing behemoth it still is today. But Humby recently claimed the supermarket giant’s obsession with instore promotions has made the Clubcard scheme virtually irrelevant.
One industry source told DecisionMarketing: “Would a sale of DunnHumby make any difference to Clubcard? Possibly not. Most loyalty schemes are run by a third-party company anyway.
“And in the current climate Tesco is facing stark choices. Philip Clarke [the former chief executive] was always at pains to say Clubcard would win back customers, but that clearly has not worked yet. Cash-strapped consumers are going where the prices are low, not where you can get a 50p coupon.
“It could even be argued that Tesco might be able to apply more pressure on DunnHumby to make Clubcard work harder, if it was owned by someone else.”
But Publicis Chemistry planning director Toby Richards cautions against a sell-off. Writing for Retail Week, he said: “It can’t be right that the intimate knowledge of Tesco customers, their behaviours, buying habits and value resides outside of Tesco; strategically, it can’t be right that an external organisation would know more about Tesco’s customers than the retailers themselves.
“Tesco should resist the temptation to sell, and focus instead on what their customers are telling them every minute of every day. It’s good to listen.”
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