Tesco Sells Fresh & Easy For Revived Wild Oats Chain

Tesco (NASDAQ:TESO) will sell most of its 200-store Fresh & Easy U.S. grocery chain to private equity firm Yucaipa, the company said on Tuesday (Sept. 10).

Under the deal that will allow the U.K.'s largest retailer to escape from its failed U.S. investment, Yucaipa will acquire more than 150 of Fresh & Easy's stores, along with distribution and production facilities. Stores not included in the deal will be shut down, and the deal itself is expected to close within three months, Bloomberg reported.

Yucaipa, which is controlled by billionaire Ron Burkle, is expected to rebrand the surviving stores under the Wild Oats banner, which is owned by Burkle associate and former 7-Eleven CEO Jim Keyes, who is expected to serve as Wild Oats CEO once the deal is completed. Burkle was the largest shareholder in the original Wild Oats Markets chain when it was sold in 2007 to Whole Foods (NASDAQ:WFM).

Tesco has been trying to sell off the Fresh & Easy chain for months, and has been in negotiations with Yucaipa since at least early June. The U.K. chain wanted a clean exit from its built-from-scratch U.S. grocery chain, which it launched in 2007 with stores in California, Arizona and Nevada.

But after more than five years, more than $1.5 billion invested and nothing but consistent losses to show for its efforts, Tesco's biggest priority in the deal was the ability to unload all its remaining U.S. obligations on a single buyer. Tesco said closing the stores it didn't sell—most of which are in poorly chosen locations—will cost it at most about $240 million, more than half of which is a loan to the holding company that will own the remaining stores. About 4,000 store and distribution-center employees will be transferred to that Yucaipa holding company.

For more:

- See this Bloomberg story

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