Tesco confirmed today that it has agreed deals to off-load its Turkish business Kipa and the restaurant chain Giraffe as part of its strategy to refocus on its core grocery operation.
Tesco is selling its 95.5% controlling stake in the 169-strong Kipa chain to Migros, the BC Partners-backed Turkish supermarket chain. The group said the disposal will result in estimated cash proceeds of around £30m and reduce its total indebtedness £110m.
In a separate transaction, Tesco said it had agreed to sell its loss-making Giraffe restaurant chain to Boparan Restaurants Holdings Limited, a private investment vehicle owned by Ranjit Boparan, the founder of 2 Sisters Food. The sale, for an undisclosed sum, includes 54 standalone restaurants, of which 12 are franchise sites, and 3 restaurants within Tesco stores. Boparan Ventures currently owns the restaurant chains Harry Ramsden’s and Fishworks.
Commenting on the sales, Dave Lewis, Tesco Chief Executive, said: “The sale of Kipa reflects the particular strategic challenge we have faced in Turkey as a small regional player in a highly competitive market. It removes the need for the sustained investment required to enable the business to compete independently, allowing us to focus on improving profitability in Central Europe and continuing to grow our businesses in South East Asia.”
On Giraffe, Lewis commented: “As we stabilise the business in the UK, we continue to focus on where we can best serve the needs of our customers, while ensuring our business remains sustainable for the long-term.
“Giraffe is a much loved brand, and while casual dining remains an important part of the shopping trip for many of our customers, we will continue to meet these needs through our Tesco Cafés and other providers”.
Acquired three years ago for £49m under the reign of its former CEO Philip Clarke, Tesco had hoped to use the Giraffe restaurant business to lure shoppers to its larger out-of-town stores. However, losses at the chain have continued to grow and last year it posted a £4.1m loss on the back of new openings and a write-down on the value of some existing sites.
As part of his turnaround plan for Tesco’s core grocery business, Lewis has been seeking to cut debt and shed non-core units. He is reportedly also looking for buyers for coffee chain Harris + Hoole and Dobbies, its garden centres business.
- Not yet clear if the Giraffe Restaurants will remain in situ, paying a combination of rent and percentage of sales to Tesco.
- …thus giving a use of ‘spare’ space, a revenue stream, and some traffic…
- …without the burden of having to make an acceptable profit