UK retail giant Tesco has agreed to sell its Kipa supermarket business in Turkey to rival Swiss company Migros for approximately £30m.
The transaction, if approved, will reduce total indebtedness by roughly £110m, Tesco revealed. Tesco operates roughly 173 Kipa stores in Turkey and holds a 95.5% stake.
Dave Lewis, Tesco Chief Executive, took the helm of the flagging retailer in September 2014. While the company saw a 55% drop in profits for the first six months to 31 August 2015, it has slowly been turning its business around; in the year to 27 February 2016, the supermarket returned to profit (£162m pre-tax), registering its best sales figures in more than three years.
Lewis explained that the sale of Kipa allows Tesco to focus on improving profitability in central Europe and growing its businesses in South East Asia. “The sale of Kipa reflects the particular strategic challenge we have faced in Turkey as a small regional player in a highly competitive market," he said. "It removes the need for the sustained investment required to enable the business to compete independently.”
He added: “The sale agreement recognises the significant improvements in the performance of the business over the last 18 months and I would like to thank Kipa colleagues, suppliers and partners for their service during a period of considerable change.”
Tesco simultaneously announced it would also be selling restaurant chain Giraffe to Boparan Restaurants Holdings Limited.
