TESCO PLANS $460 MLN THAI PROPERTY FUND TO FUEL GROWTH

Christopher Bush, CEO of Tesco Lotus
Photo Source: Bangkok Post

Sept. 21 (Bloomberg) -- Tesco Plc, the world’s third- largest retailer, said it plans to sell shares in its Thai property fund on the domestic stock exchange, raising about 14 billion baht ($460 million) for expansion.

The initial public offering will include 15 shopping malls anchored by Tesco Lotus stores, as well as freehold land and ground leases, the Cheshunt, England-based grocer said in a statement today. Tesco leases its hypermarkets from the fund.

Tesco has raised about 5.5 billion pounds ($8.6 billion) in the past seven years from selling and leasing back U.K. stores and last month got $115 million from its first issue of yuan- denominated dim sum bonds in China. The retailer has more than 750 stores in Thailand, where its hypermarket business is market leader. Revenue there last year was 2.84 billion pounds, making it the third-largest market after the U.K. and South Korea.

The IPO means Tesco can invest in “innovation and growth,” Chief Financial Officer Laurie McIlwee said in the statement. The property fund “is in line with the property strategy we unveiled earlier this year and will be a great example of the value we create through our property,” he said.

The number of Tesco Lotus outlets in Thailand may rise to 1,000 by early 2012, said Christopher Bush, chief executive officer of Ek-Chai Distribution System Co., the Thai company that operates the stores for Tesco.

“The REIT is an alternative for us to raise funds for expansion,” Bush said at a media briefing in Bangkok. “In the past, we used debt and our own cashflow for that.”

The final structure of the fund is subject to market conditions and approval by the Thai Securities and Exchange Commission, Tesco said.

“Tesco’s REIT will provide another good investment alternative for Thai investors,” Charamporn Jotikasthira, president of the Stock Exchange of Thailand, said in Bangkok. “Thai investors have been searching for good securities from companies like Tesco in which to invest their savings.”

--With assistance from Anuchit Nguyen in Bangkok. Editors: Paul Jarvis, Robert Valpuesta

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net