Tesco – AGM 14 May 2020
The general meeting is convened to approve a disposal of Tesco Thailand and Tesco Malaysia businesses to a Thai Charoen Pokphand Group. The disposal represents an enterprise value of £8.2bn, corresponding to an EV/EBITDA multiple of 11.3x based on FY2019/20 or 12.5x based on FY2018/19. The expected net cash proceeds are £8.0 billion before tax and other transaction costs. Tax and other transaction costs are expected to be c. £0.1 billion.
Tescons indebtedness has become unbearable and the group needs urgent action in light of the Covid-19 uncertainty. However, we do not agree that the disposal of the growing and profitable business in a promising market is the best solution which will lead to sustainable value creation. ECGS considers that Dave Lewis, the group CEO who is about to leave the group, made a mistake by reintroducing the dividend distribution in 2017/18 before strengthening the groupns financial situation by reducing its indebtedness. We would recommend to halt the dividend and issue shares with pre-emptive rights. Based on our concerns about the sustainability of the proposal for long-term value creation, we recommend to OPPOSE.
Tesco is a retailer. Co. and its subsidiaries are engaged in retailing and associated activities in the U.K. and Republic of Ireland; and Czech Republic, Hungary, Poland, Slovakia, Malaysia, and Thailand. Co. provides retail banking and insurance services through Tesco Bank in the U.K. Co. sells and services of motor and home insurance policies underwritten by Tesco Underwriting Limited, or in a minority of cases by a third-party underwriter. As of Feb 25 2017, Co. had a total of 6,809 stores worldwide, including 256 franchised stores.
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