Tesco to pay £5bn special dividend in late February after Thailand approves disposal

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Tesco PLC (LON:TSCO) said it will be free to pay a £5bn special dividend to investors towards the end of February 2021 after all the conditions were satisfied for completion of the sale of its Thai and Malaysian businesses.

Approval for the deal has been given by Thailand’s trade and competition office, the OTCC, and approved by purchaser CP Group, which follows the approval received from Malaysia’s trade and consumer affairs ministry last month.

This means there are no further conditions outstanding, the supermarket group said in a statement, and the disposal is expected to complete on or around next Friday, December 18, 2020.

The UK grocery market leader has set out its intention to pay out the net proceeds of the disposal to shareholders via a special dividend, together with a share consolidation, and has promised to contribute £2.5bn to its pension scheme.

Tesco expects to pay the special dividend equivalent to around 51p per share “on or around 26 February 2021”, if it gets approval from shareholders at a general meeting on or around February 11, 2021.

In a statement, Tesco group chief executive Ken Murphy said: “This sale allows us to focus on our businesses across Europe and to continue delivering for customers, make a significant contribution to our pension deficit and return value to shareholders.”

Having exited from Malaysia, Thailand, China, Japan, Poland, South Korea, Taiwan and the USA in the past decade, the group will now be focused only on the British Isles and three Central European markets, plus an investment in India.

Broker Shore Capital said it was “important and very good news for Tesco’s shareholders”, even though the Asian business is “a jewel in the group’s crown and a source of ongoing organic operating growth”.

News of the final completion is later than originally expected by the group, the analysts said, but will be done and dusted before Christmas.

“Accordingly, with this news and the prospects of the special dividend, share consolidation and pension deficit pay down plus onward progression, we welcome the combined developments and reiterate our ‘buy’ recommendation on what we deem to be lowly valued Tesco’s shares,” they added.

The shares were up 1% to 227p just after noon on Wednesday, still down 11% since the start of the year.

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