This latest decision comes after a strategic review by Tesco in the US.
Yucaipa will acquire more than 150 stores as well as Fresh & Easy’s Riverside distribution and production facilities. In addition, more than 4,000 employees will be transferred to the new business, Tesco said.
Tesco will also lend Yucaipa £80m as part of the deal secured against the Riverside Campus facility.
Billionaire investor Ron Burkle, who founded private equity firm Yucaipa, was in talks with Tesco since June this year in order to acquire Tesco’s Fresh & Easy business.
Tesco CEO Philip Clarke said this decision represents the best outcome for Tesco shareholders and Fresh & Easy’s stakeholders.
"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," Clarke added.
The transaction is expected to be complete within three months, subject to legal and regulatory approvals.
Tesco, which reported first drop in profits for nearly two decades, invested around £1bn in the US before deciding that Fresh & Easy was a liability on earnings and management time.
Founded in 1986 by Ron Burkle, Yucaipa has completed mergers and acquisitions valued at more than $30bn.