International retail giant Tesco has announced that it has agreed the sale of the substantive part of its US operation Fresh & Easy Neighborhood Market to YFE Holdings Inc., an affiliate of Yucaipa Companies LLC.
As part of an orderly restructuring process, investment firm Yucaipa will acquire more than 150 stores as well as Fresh & Easy’s Riverside distribution and production facilities.
More than 4,000 employees will also transfer to the new business and, as part of the deal, Tesco will loan the new business £80m, secured against the Riverside Campus facility.
Those stores not included in the transaction will be closed over the coming weeks, Tesco noted, with the total cash outflow relating to the closure of these stores, other expenses and the loan expected to be no more than £150m (€177m, US$236m).
The sale to Yucaipa, which is subject to the necessary legal and regulatory approvals, is expected to complete within three months, and following completion there will be no ongoing financial exposure for Tesco.
The move to sell Fresh & Easy seemed inevitable after the announcement in December 2012 of a strategic review of the US business, six years after it was first launched.
Tesco has poured an estimated £1bn into the business since 2007 but notably failed to turn a profit.
The UK-based retailer said that the sale was in line with its focus on the disciplined allocation of capital to those markets with significant growth potential and the opportunity to deliver strong returns.
'The decision we are announcing today represents the best outcome for Tesco shareholders and Fresh & Easy's stakeholders,' said Philip Clarke, CEO of Tesco. 'It offers us an orderly and efficient exit from the US market, while protecting the jobs of more than 4,000 colleagues at Fresh & Easy.'
Ron Burkle, Managing Partner of Yucaipa noted that Fresh & Easy was a 'tremendous foundation'.
'Tesco should be applauded for giving their customers an affordable, healthy, convenient shopping experience,' he said. 'Its dedicated employees and great base of customers give us a solid starting point to complete Tesco's vision with some changes that we think will make it even more relevant to today's consumer.
'We plan on continuing to build Fresh & Easy into a 'next-generation convenience retail experience,' providing busy consumers with more local and healthy access for their daily needs,' Burkle added.
