Tesco Considering Spinoff of $21 Billion Supermarket Portfolio into New REIT

Reuters - March 24, 2006

Tesco Plc (TSCO.L) shares leapt to a new high on a newspaper report it was looking to extract more value from property assets, but Britain's biggest retailer said on Friday it had no immediate plans. "We are always looking at the different possibilities and of course we won't rule anything out, but there is nothing major on the cards right now," Tesco spokesman Jonathan Church said.

Tesco shares jumped almost 5 percent to a new high of 351 pence in early trade after the Daily Telegraph quoted Finance Director Andrew Higginson as saying the supermarket giant would look at placing its 12-billion-pound ($21 billion) freehold property into a real estate investment trust (REIT).

This would allow Tesco to place its property into a separately quoted vehicle and use money raised from selling shares in that entity to buy back its shares, the paper said. "We're obviously interested (in REITs) in the sense that we're a big property company," the Daily Telegraph quoted Tesco's Higginson as saying. "We've got people looking at whether it's a good idea."

Private equity firms have long been attracted to buying retailers to tap the value of their property portfolios and store groups are increasingly looking at ways of extracting value themselves. Sphere: Related Content