Tesco sells half stake in Asian ecommerce site to Alibaba

Tesco has agreed to sell just over half its stake in South East Asia ecommerce marketplace Lazada to China's giant Alibaba Group for $129m.

Ahead of Wednesday's results from the supermarket group, which made a £124m ($200m) investment in 2013, will sell an 8.6% stake to Alibaba $129m, which it said it will use for general working capital purposes.

The sale leaves Tesco with an 8.3% holding and values Lazada at roughly $1.5bn.

Alibaba will, through a separate further investment, become Lazada's controlling shareholder after the transaction.

Chinese entrepreneur Jack Ma's company has entered into a put-call arrangement with the company's shareholders that will give his company the right to purchase, and the shareholders the right to sell collectively, their remaining stakes at a fair market value within the 12 to 18 month period post closing of the transaction.

Tesco's share sell-down follows recent press reports that it may sell some of its investments in its core market too, despite directors drawing a line under further major asset sales after the sale of the Korean business.

Preliminary results on Wednesday from the grocer are expected to show revenue of £55.3bn and underlying operating profit of £932m.

Analysts at Shore Capital said they expected a "pleasing update" from the core chain, with positive fourth quarter like-for-like sales.

Goldman Sachs last week restated its 'sell' rating on the grocer with the stock up 28% in 2016 so far, growth from discounters having picked up this year and £4.5bn of debt coming due by 2020.

Ahead of the results more simplification and fine tuning is evident with the announcement thatTesco has entered into an agreement to sell an 8.6% stake in Lazada Group, the eCommerce gateway in South-East Asia to Alibaba Group for $129m. Separately, through a further investment, Alibaba will become Lazada's largest investor. Tesco now will have an 8.3% fully diluted stake, noting that it invested $200m in Lazada originally. The funds will be used for general working capital.