Mar 9, 2020
Changing times as Tesco cashes in on aversion to risk
The sale - dubbed by Tesco as an opportunistic exercise in de-risking and returning cash to investors - is everything to do with the defensiveness of selling food in times of crisis and the instinct to retrench. Tesco bought the Asia business from Thai conglomerate CP Group in 1998, during a former Asian crisis, for about $180m. The rest will be used to draw a line under Tesco's pension deficit and bring leverage down to a more conservative target of about 2.5 times earnings before nasties. A decade ago prudent Pru shareholders killed off a rash deal to buy rival AIA. As it turned out, that was not the time for prudence: the deal counts as one of the great missed moments of M&A. Now activist investor Dan Loeb's Third Point is pressing the Pru for a speedy and clean split of the UK-headquartered insurer's two remaining ill-matched arms in Asia and the US. But when the Pru presents its strategy on Wednesday, it will have little choice but to resist rash action. Jackson's exposure to the US stock market through its variable annuities products makes investors keener still to steer clear in times of trouble.
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