The UK’s largest retailer Tesco has struck a deal with Barclays to sell the majority of its banking arm for £1bn, including the transfer of approximately 2,800 employees to Barclays under the agreement, according to reports.
The supermarket chain will divest its credit card, loans, and savings divisions to Barclays while retaining profitable segments such as insurance, ATMs, travel money, and gift cards. Tesco stands to gain £600m initially from Barclays, with an additional £100m to follow after covering regulatory and other transaction-related expenses.
In an expansive 10-year exclusive partnership, Barclays will market banking products and services under the Tesco brand and leverage the popular Tesco Clubcard program. In exchange, Tesco anticipates an annual revenue stream of £50m from royalties, new account openings, and Clubcard engagement fees.
The company assured Barclays’ five million customers that no immediate action was required on their part and that they would be contacted shortly.
The agreement eliminates £7.7 billion of capital-intensive assets and £6.7 billion of financial liabilities from the balance sheet of the supermarket.
Tesco’s chief executive, Ken Murphy said, “Tesco Bank is a strong business that has helped millions of loyal customers to manage their money for more than 25 years. As we look to the future, our aim is to be the best provider of financial services in the UK, with this strategic transaction and partnership with Barclays unlocking greater value for customers and for our business.”
“The transaction will also significantly reduce our financial liabilities, in turn strengthening our balance sheet and allowing us to focus on continuing to grow our core retail business,” added Murphy.
CS Venkatakrishnan, the chief executive of Barclays, said, “This partnership with Tesco is a further demonstration of the investment we continue to make in our UK consumer business”.
“We are looking forward to working closely with the team at Tesco over the coming months to enable a smooth transition and, subject to completion of the transaction, we look forward to welcoming Tesco Bank colleagues and customers to Barclays,” added Venkatakrishnan.
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