Sime Darby expects to gain RM270m from Tesco Malaysia disposal

The conglomerate has entered into conditional agreements with CP, Tesco BV and Tesco plc for the disposal

By SHAHEERA AZNAM SHAH / Pic TMR

SIME Darby Bhd is expected to gain RM270 million from the disposal of its 30% stake in Tesco Malaysia to Thailand’s Charoen Pokphand (CP) Group.

Sime Darby said its wholly-owned subsidiaries, Sime Darby Allied Products Bhd (SDAPB) and Sime Darby Holdings Bhd (SDHB), have entered into conditional agreements with CP Retail Development Co Ltd (CP), Tesco Holdings BV and Tesco plc for the disposal.

The total proceeds to be received by Sime Darby upon completion of the proposed disposal is RM300 million, which consist of consideration for the disposal of 30% ordinary shares to CP, as well as a consideration from Tesco plc for consenting to the transfer of Tesco BV’s shares in Tesco Malaysia to CP.

This was derived based on the enterprise value of Tesco Malaysia and adjusted for the net debt.

“Sime Darby is expected to record an estimated net gain on disposal of RM270 million from the proposed deal,” the conglomerate stated in a filing to Bursa Malaysia yesterday.

The proposed disposal is expected to be completed in the second half of 2020 (2H20).

The completion of the proposed disposal is conditional upon the completion of the sale of Tesco BV’s shares in Tesco Malaysia to CP, which in turn is conditional upon the approval of the Ministry of Domestic Trade and Consumer Affairs of Malaysia and the completion of the sale of Tesco Stores (Thailand) Ltd to CP.

Sime Darby added that the sale is expected to have a material positive impact on its earnings and earnings per share (EPS) for the financial year ending June 30, 2021 (FY21).

In March, the CP Group announced it was pursuing a deal for its subsidiaries to acquire 86.9% of Tesco’s operation in Thailand and 100% of the retailer’s business in Malaysia, estimated to be valued at US$10.6 billion (RM46.32 billion).

Tesco plc, a British retailer, currently operates 1,967 stores in Thai- land under the brand Tesco Lotus and 74 outlets in Malaysia. In 2018, Tesco’s Asian business contributed a combined £4.9 billion (RM26.46 billion) in revenue and £286 million in profit, which was 20% of its global earnings.

At yesterday’s closing, Sime Darby shares rose three sen or 1.64% to RM1.86, valuing it at RM12.65 billion.