Tesco is looking to secure an immediate injection of cash following its announcement of a record £6.38bn loss, with the supermarket giant revealing its review of data arm DunnHumby is “well advanced”.
The division has been valued at up £2bn, although whether Tesco will achieve this price for a majority stake in the business depends on if it can spark a bidding war between the interested parties.
A hatful of businesses have already 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.
But some analysts warn that a firesale of Tesco’s other assets – including Tesco Bank and its Asian operation – could damage its long-term prospects, as these divisions will ultimately turn round.
According to Shore Capital analysts, there is also an increasing probability that the company will decide on a rights issue in the near future, a move it has so far resisted.
The £6.38bn disaster is not only the biggest loss suffered by a UK retailer, it is one of the largest in the country’s corporate history.
However, the retailer has valiantly tried to put at least some gloss on the results by saying its transformation programme is “progressing well” and UK like-for-like sales volumes are up for first time in over four years. UK sales of £1.4bn are “in line with expectations”, Tesco claims.
Chief executive Dave Lewis said the company has “sought to draw a line under the past and begun to rebuild” adding, “already we are beginning to see early encouraging signs from what we’ve done so far”.
In a statement that would put even Voltaire’s Pangloss to shame, Lewis added: “Over the last six months we have put customers back at the centre of everything we do. By focusing on the fundamentals of availability, service and targeted price reductions, we have seen a steady increase in footfall, transactions and, most significantly, volumes. More customers are buying more things at Tesco.”
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