Tesco regains ownership of 21 UK stores in British Land swap deal

Britain's biggest retailer Tesco has regained sole ownership of 21 superstores in a 733 million pounds ($1 billion) asset swap with British Land, part of new boss Dave Lewis's plan to strengthen its core UK business.

Lewis, Tesco chief executive since September, is pursuing efficiency measures, slashing costs and selling assets to mend the group's finances and help it fight back from years of market share losses, debt-ratings downgrades and an accounting scandal.

Last year he identified an opportunity to increase the proportion of the 3,300 UK stores where it owns the freehold, which as of October last year was 53 percent.

The 21 superstores, valued at 352 million pounds, were part of a joint venture between Tesco and British Land and were subject to rent increases linked to the retail price index (RPI).

In exchange for the superstores, British Land will take over Tesco's stake in three shopping centres, three retail parks and three standalone stores which are held in two other joint ventures between the two firms. Those assets were valued at 381 million pounds.

Tesco will continue to lease the stores at these sites at market rents which are not subject to RPI-indexed increases.

As part of the deal Tesco will also receive 96 million pounds from British Land.
"This transaction with British Land allows us to increase our ownership and thereby insulate more of our businesses from indexed rent reviews," said Lewis. "This agreement makes our business simpler and stronger."

Shares in Tesco, up 0.5 percent at 244 pence by 0843 GMT, are down 16.5 percent year-on-year but up 32 percent over the last three months on recovery hopes.

British Land said the deal was in line with its strategy to evolve its retail portfolio. It further reduces its foodstore weighting, increases its exposure to multi-let retail parks and shopping centres and would be accretive to earnings in 2016.

Shares in British Land were down 0.3 percent at 858p.

£1 = $1.47