Tesco exits US market: to sell Fresh & Easy to Yucaipa

Tesco, the UK's largest and the world's third-largest retailer, has exited the US market by agreeing to sell 150 of its loss making Fresh & Easy stores in the US to Yucaipa, the investment vehicle of US billionaire Ron Burkle.

Yucaipa will acquire more than 150 stores as well as Fresh & Easy's Riverside distribution and production facilities and more than 4,000 employees.

As part of the deal, Tesco will loan the new business £80 million, secured against the Riverside Campus facility.

Tesco said that those stores not included in the transaction will be closed over the coming weeks and the total cash outflow relating to the closure of these stores, other expenses and the loan is expected to be no more than £150 million.

Philip Clarke, CEO of Tesco, said, "The decision we are announcing yesterday represents the best outcome for Tesco shareholders and Fresh & Easy's stakeholders. It offers us an orderly and efficient exit from the US market, while protecting the jobs of more than 4,000 colleagues at Fresh & Easy."

Fresh & Easy opened its first stores in November 2007 and has 200 neighbourhood markets in California, Nevada and Arizona. The company employs more than 5,000 people, including 1,300 at its distribution and manufacturing facilities in Riverside.

Tesco had in April said that it lost around £1.2 billion ($1.8 billion) in its US business.

Tesco's exit from the US market comes two years after   pulled out of the Japanese market and last month said it would fold its unprofitable Chinese operation into a state-run company as a minority partner.

Tesco is in the process of ringing down the curtain on its nine-year solo venture in China in which the retailer invested £1.5 billion - making it the retailer's latest aggressive international expansion to come a cropper.

Tesco is in talks with China's biggest retailer, state owned China Resources Enterprise for a joint venture, which would see Tesco's 131 stores in the country merge with CRE's 2,986 sites under the Vanguard brand.