Kipa's shares dive after Tesco sells majority stake at discount

Tesco said the disposal of Izmir-based Kipa, which still required regulatory approval, would produce cash proceeds of £30m, and contribute to a roughly £110m cut in total indebtedness.

It has flogged the under-performing investment to Swiss retail group Migros. At 13:21 BST, shares in Kipa were down 19.66% to 1.88 Turkish lira.

"Tesco is receiving only £30m for Kipa from Migros, a business which we estimate lost about £40-45m in full-year 2016," said Shore Capital in a note.

"We sense large write-downs on this business going through the profit and loss (statement), whether they were covered by prior iterations or are to come, remains to be seen," said the brokerage, adding the lower indebtedness was nonetheless welcome.

Tesco chief executive Dave Lewis said the Kipa sale reflected the particular strategic challenge the UK grocery giant had faced in Turkey as a small regional player in a highly competitive market.

He explained that it removed the need for the sustained investment required to enable the business to compete independently, and allowed Tesco to focus on improving profitability in Central Europe and grow operations in South East Asia.

"The sale agreement recognises the significant improvements in the performance of the business over the last 18 months and I would like to thank Kipa colleagues, suppliers and partners for their service during a period of considerable change," Lewis said

In a separate deal, Tesco confirmed it was also selling the Giraffe restaurant chain, which it snapped up in 2013, to Harry Ramsden's-owner Boparan Restaurants Holdings.

The sale of Giraffe included 54 standalone restaurants -- of which 12 were franchised -- and three restaurants within Tesco stores.

Lewis said the Giraffe sale reflected Tesco's move to focus on where it can best serve the needs of its UK customers while ensuring the business remains sustainable for the long term.