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Tesco paying Yucaipa to take on its Fresh & Easy grocery stores

Tesco paying Yucaipa to take on its Fresh & Easy grocery stores

Nearly three years ago I posted a story titled, “Who is Tesco and why should we care?” I pointed out that the world’s third largest retailer and dominant grocer in England had 168 Fresh & Easy grocery stores on the west coast of the United States, and had the capital to make itself a supermarket player here in the Philly market by buying up stores and chains, if it so desired.

Well, that’s not going to happen. In an announcement last week, it was reported that Tesco will pay private equity firm Yucaipa $235 million to assume the supermarket chain’s liabilities. Yucaipa will own and operate about 150 of the stores we well as a distribution facility, and close the remaining 50 stores. Tesco is even making a loan of about $125 million to help Yucaipa fund the operations.

Tesco CEO Philip Clarke hailed the decision as one that will allow his company to exit the U.S. market and protect more than 4,000 existing jobs.

According to Tesco, Fresh & Easy stores had a gross asset value of $362 million in February, and generated net losses of $253 million in its last fiscal year.

Yucaipa and its CEO Ron Burkle are no strangers to the supermarket business. The company’s buyout of A&P (Pathmark, Super Fresh) in 2011 allowed the legendary supermarket chain to emerge from bankruptcy.

There is already talk that Yucaipa may decide to convert many of the Fresh & Easy stores into a Wild Oats Marketplace to compete directly with Whole Foods, but for the time being, it’s business as usual.