Tesco (TSCO.L) has agreed to sell its Polish arm to Denmark’s Salling Group for £181m ($227).
Tesco announced the all-cash deal on Thursday. The transaction, which covers 301 stores, is expected to close by the end of this financial year.
“We have seen significant progress in our business in Central Europe, but continue to see market challenges in Poland,” chief executive Dave Lewis said in a statement.
“Today's announcement allows us to focus in the region on our business in Czech Republic, Hungary and Slovakia, where we have stronger market positions with good growth prospects and achieve margins, cashflows and returns which are accretive to the Group.”
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Tesco Polska had sales of £1.3bn last year but made an operating loss of £24m.
“We understand and welcome the exit from a market where the business never really did breakthrough,” wrote Clive Black and Darren Shirley, retail analysts at stockbroker Shore Capital.
The deal will leave Tesco with 19 stores in Poland. The supermarket said it was seeking to offload these and said 22 stores have already been sold over the last 18 months for around £200m.
The sale of Tesco Polska is the latest move by Lewis to slim down the supermarket group’s international operations. Tesco has exited a joint venture in China and the sold its Thai and Malaysian business over the last years.
Lewis thanked Tesco Poland staff “for their dedication to serving customers in Poland over many years.”
“The energy and commitment they have shown over the past two years transforming Tesco Poland to a two-format business has been incredibly impressive,” he said. “We see this transaction as the best way to secure the future of the business for our colleagues and customers in Poland.”
Tesco shares rose 1.2%, amid a wider market sell-off.