Tesco to sell £217mn Dobbies garden chain

London / Bloomberg

Tesco Plc agreed to sell its Dobbies Garden Centres chain for 217 million pounds ($309 million) as the U.K.’s biggest retailer continues to sell peripheral assets to focus on reviving its main supermarket business.
Dobbies, which operates 35 garden-center stores across Scotland, England and Northern Ireland, will be bought by an investor group led by Midlothian Capital Partners and Hattington Capital, Tesco said in a statement.
The purchase price represents a “respectable” amount of money for Dobbies, a business which Tesco never integrated into its core offer during the eight years it owned the chain, said Charles Allen, an analyst at Bloomberg Intelligence.
The sale is another step in Chief Executive Officer Dave Lewis’s efforts to focus management’s effort on the recovery of Tesco’s U.K. grocery business, where profitability has been squeezed amid an industry price war. Last week, Tesco agreed to sell its Turkish grocery business Kipa and U.K. restaurant chain Giraffe. The disposals also edge Tesco closer to recovering its investment grade rating, which it lost last year.
The investor group assembled by Midlothian and Hattington Capital, which includes numerous retail experts, has pledged to protect jobs and grow Dobbies throughout the U.K. from its base in Scotland. Ares Capital Partners provided financing for the bid, the buyers said in a statement.
Tesco said it will continue to offer customers home and garden products through its own stores and online. Dobbies contributed 17 million pounds in pretax profit in the year ended Feb. 27. Shares of Tesco rose 0.2 percent to 153 pence as of 8:03 a.m. in London.
Tesco is scheduled to report its first quarter sales on June 23.