NAPA and VACAVILLE -- United Kingdom-based Tesco, one of the world's largest retailers, is exiting its 7-year-old U.S. small-store venture Fresh & Easy Neighborhood Market, which has two North Bay locations, in a deal with billionaire Ron Burkle's strategic investment group The Yucaipa Companies, LLC, the parties announced Tuesday.
The Napa and Vacaville stores, opened in 2011, aren't among planned store closures as part of the deal, according to a spokesman for El Segundo-based Fresh & Easy (freshandeasy.com). The chain also purchased land in Vallejo and secured space in Fairfield for stores, but information on planned stores isn't available. The grocer also had scouted locations in Cotati and Windsor.
"Though the vast majority of stores in the [Bay Area] will remain open," said spokesman Brendan Wonnacott. There are 17 other locations open in the Bay Area. The five Sacramento-area stores are on the list of closures, as is one in Modesto, according to The Sacramento Bee.
YFE Holdings, Inc., an affiliate of Yucaipa (yucaipaco.com), would take on more than 150 of the chain's 200 stores and employ 4,000-plus workers in exchange for an £80 million ($125 million) loan from Tesco, secured by Fresh & Easy's Riverside campus, where private-label products are produced. Stores not included in the acquisition would be close in coming weeks.
The cost of the handoff of Fresh & Easy, including the loan, closing stores and offering transition packages to employes would cost up to £150 million ($250 million), according to Tesco. Other financial terms of the deal weren't disclosed.
"The decision we are announcing today represents the best outcome for Tesco shareholders and Fresh & Easy's stakeholders," Philip Clarke, chief executive officer of Tesco (tescoplc.com), said in a statement. "It offers us an orderly and efficient exit from the US market, while protecting the jobs of more than 4,000 colleagues at Fresh & Easy."
In December, Fresh & Easy announced it was starting a review of options for shoring up its business, including the sale of all or part of operations and bringing in a partner to run it. The financial challenges were attributed to garnering consumer acceptance of a small-format grocery. Fresh & Easy opened 10 3,000-square-foot stores in Southern California last year as a pilot concept of offering the most popular items in an even smaller location.
Other retailers, including Wal-Mart, have been experimenting with the concept, popular in Europe and outside the U.S., where Tesco is a dominant player.
Tesco reported a £1 million ($1.57 million) writedown in the value of Fresh & Easy in its most recent quarter.