Tesco's efforts to sell its U.S. Fresh & Easy Neighborhood Stores chain is running into difficulties. With no sale imminent, Tesco is considering closing or breaking up the chain and selling it to multiple buyers, according to a report in The Financial Times.
If that happens, Tesco could easily be facing a financial hit worse than the $1.5 billion writedown it announced in April, reported CSPNet. The chain was apparently about to close a deal with the Yucaipa Cos., the investment company of U.S. billionaire Ron Burkle. Discussions were far enough along that Jim Keyes, former CEO of both 7-Eleven and Blockbuster, was even tagged as the new CEO of the new operation.
Those talks reportedly stalled after Tesco became adamant that it wanted "a clean break from the United States" to avoid liabilities for its shareholders.
Supermarket News quoted a source discussing the implications of that clean break. "When I heard Yucaipa was talking to Tesco, I knew it meant there were no other bidders because Yucaipa would not want to get stuck with all of Fresh & Easy's long-term leases when it already has so much debt with Pathmark and A&P," the source said. "With so many bad locations, no one is likely to want to take on those leases. Certainly Tesco could find other tenants for the stores and become a big landlord, but it wants to get out altogether, all at once."
The source speculated that only Aldi, which has plans to enter California, might be interested in taking over the leases "because it can generate enough volume to make it work as it puts itself on the West Coast map."
Tesco CFO Laurie McIlwee seemed to confirm that when it told Supermarket News: "What we're most interested in is buyers that are interested in buying the complete business. A clean sale would remove redundancy and lease issues."
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