Tesco starts £500m share buyback

·2-min read
Tesco starts £500m share buyback
Tesco's CEO said that share buybacks were a way to fend off private equity advances that have become a feature of the grocery sector. Photo: PA

Supermarket giant Tesco (TSCO.L) announced a £500m ($686m) share buyback scheme on Monday morning in London. 

The move comes following Tesco financial results earlier this month, where the retailer said it could afford to start the scheme. In the same set of results it had also raised its outlook. 

Tesco's CEO said at the time that share buybacks were a way to fend off private equity (PE) advances that have become a feature of the grocery sector.

The supermarket said that Citigroup will carry out the buyback on its behalf. 

CEO Ken Murphy also said earlier this month that Tesco was confident in resilient supply chains going into Christmas, and that the business would overcome "bumps in the road" as the UK faces a shortage of HGV drivers and post-Brexit complications. 

Tesco stock headed higher on Monday. Chart: Yahoo Finance UK
Tesco stock headed higher on Monday. Chart: Yahoo Finance UK

Both Morrisons (MRW.L) and Asda have been subject to PE takeover bids over the course of the last year. 

There has been much speculation around the future of the UK grocery market in recent months. Some in the market think other players in the space could go private next, as Morrisons' failed suitors look for a place to deploy their cash.

Read more: What are share repurchases?

“Industry insiders say Tesco is less attractive than Sainsbury’s (SBRY.L) because it lacks an extensive property portfolio, however it does offer exciting digital expansion plans, with its online infrastructure superior to its big four competitors," said Ross Hindle, analyst at Third Bridge.

Tesco stock headed 0.6% higher following the news. 

Watch: Tesco raises outlook and will buyback shares

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