German family-owned retail group Schwarz, parent company of Lidl and Kaufland, is reportedly preparing an offer for Tesco’s businesses in the Czech Republic and Slovakia.
The Financial Times (FT) reported the development, citing unnamed sources, as the UK retailer moves forward with a sale of its continental European operations.
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The grocer’s European arm is its only substantial business outside the UK and Ireland.
Last year, the division brought in £4.5bn ($5.95bn) in revenue but only £115m in adjusted operating profit.
Tesco runs 561 outlets across its eastern European markets, territories that have seen intensifying competition lately.
Dutch supermarket operator Ahold Delhaize and Biedronka, the Polish discount chain under Jerónimo Martins, are also said to be preparing offers.
Tesco’s Hungarian arm, where the retailer opened its first European store in 1995, has faced pressure from price caps and levies introduced under former Hungarian Prime Minister Viktor Orbán’s administration, measures targeted at foreign-owned retail chains.
These restrictions continue under current prime minister Péter Magyar, who said earlier this month that the policy was under review given its effects on the country’s farmers.
Tesco has a history of exiting overseas markets, having offloaded its South Korean unit for £4.2bn in 2015 and its Thailand and Malaysia businesses for £8bn in 2020.
Its US venture, Fresh & Easy, was closed in 2013 after sustaining losses.
The FT report said that Czech and Slovak assets are being marketed separately from the Hungarian business, with first-round bids expected by the end of this month, though further bidders could still emerge.
Tesco has enlisted Goldman Sachs and Citi to handle the sale of its Central European division, covering Hungary, the Czech Republic and Slovakia.
News first broke in July that Tesco was considering offloading its Central and Eastern European operations, a step that would close out three decades of activity in the region.
