Tesco puts U.S. grocery chain in bankruptcy, seeks sale
By Tom Hals
(Reuters) - Britain's Tesco Plc (TSCO.L: Quote) put its U.S. grocery store chain into bankruptcy on Monday as part of a plan to sell most of the 167 stores to a private equity firm led by billionaire Ron Burkle.
The bankruptcy ends the grand entrance onto the U.S. stage of Britain's biggest supermarket chain. When Tesco launched the chain in Arizona, California and Nevada in 2006, many expected the deep-pocketed company to quickly expand to challenge the dominant U.S. food retailer, Wal-Mart Stores Inc (WMT.N: Quote).
But Tesco jumped into the U.S. Southwest just as the region's sizzling real estate market began to cool, and the U.S. business never generated a profit, according to Bankruptcy Court documents.
Under the proposed sale, an affiliate of Tesco will lend Burkle's private equity firm Yucaipa Cos $120 million to help fund the takeover of the chain, Fresh & Easy Neighborhood Market Inc. Yucaipa anticipates acquiring and operating 150 stores.
Tesco has said the stores that are not sold will be closed. It has said about 4,000 jobs will be preserved out of 4,187 current employees.
A unit of Tesco will end up with a 22.5 percent stake in the Yucaipa affiliate that acquires the grocery store chain, according to documents filed in the U.S. Bankruptcy Court in Delaware.
The proposed sale to Yucaipa will serve as a leading bid in a court-supervised auction, which Fresh & Easy said it plans to hold on November 11. The company asked the court to schedule a hearing on November 13 to approve the sale.
Tesco spent $610 million in the first two years building the business, and sales eventually grew to $1.2 billion annually, according to court documents. Continued...