Tesco Sells Fresh & Easy Grocery Stores to Burkle's Yucaipa

LOS ANGELESFresh & Easy grocery stores will soon come under new ownership following a sale by England-based Tesco PLC. 

An affiliate of the investment firm Yucaipa Companies LLC will purchase more than 150 stores and Fresh & Easy's Riverside, Calif. distribution and production facilities, Tesco announced today. 

The sale to YFE Holdings Inc. is expected to close within three months following legal and regulatory approvals. As part of the deal, Tesco will loan billionaire Ron Burkle's Yucaipa 80 million pounds.

Fresh & Easy, based in El Segundo, Calif., operates 200 neighborhood markets in Arizona, California and Nevada. More than 4,000 employees will transfer to the new business. Stores that are not included in the deal will close "over the coming weeks", Tesco said.

On its website, Fresh & Easy doesn't specify which stores are closing.

In an article published March 21, The Los Angeles Times estimated Fresh & Easy has suffered cumulative annual losses of roughly $1 billion. Tesco, which entered the U.S. market in 2007, had implemented a number of measures to cut costs and make Fresh & Easy profitable. But in December, the multinational company announced plans to undertake a strategic review of Fresh & Easy.

"It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form," Tesco acknowledged at the time. In the fiscal year ending Feb. 23, 2013, the stores, campus in Riverside and other assets that are subject to the sale posted net losses before taxes of 163.4 million pounds.  

Tesco said the loan, cash outlay related to store closures and other expenses will total no more than 150 million pounds.

Founded in 1986 by Burkle, Fresh & Easy's new owner, Yucaipa, has completed mergers and acquisitions valued at more than $30 billion, according to Yucaipa's website.