Los Angeles — The Yucaipa Cos., the investment firm founded by supermarket mogul Ron Burkle, has agreed to purchase the El Segundo, Calif.-based grocery chain Fresh & Easy. While the purchase price was undisclosed, the assets included in the transaction — more than 150 stores, located mostly in Southern California, and a distribution and production facility in Riverside — were valued at $362.2 million (£229.3 million) at the end of fiscal 2012.
United Kingdom retailer Tesco (LSE: TSCO) is selling Fresh & Easy just six years after launching the brand. Of the 200 stores currently operating, 50 will close in the coming weeks, the remainder being acquired and run as a new business under Yucaipa.
Tesco will lend approximately $126.4 million to the new business as part of the deal.
"The decision we are announcing represents the best outcome for Tesco shareholders and Fresh & Easy's stakeholders," says Philip Clarke, CEO of Tesco. "It offers us an orderly and efficient exit from the U.S. market while protecting the jobs of more than 4,000 colleagues at Fresh & Easy."
Even with those 4,000 employees being transferred to the new business, approximately 400 will lose their jobs as a result of the closures, says Fresh & Easy spokesman Brendan Wonnacott. Tesco reported the brand's net losses before tax at £163.4 million ($258.4 million) for fiscal 2012, which ended Feb. 23.
The chain, which made its debut in 2007, has locations in Nevada and Arizona in addition to California. Fresh & Easy offers meals both fully prepared and ready-to-cook as well as standard grocery items under a store label. Varieties include "Eatwell," for weight control; "Goodness," geared toward children; and organic, gluten-free and sugar-free foods.
After being founded in 1986, Yucaipa Cos. has acquired a number of other grocery franchises, including Food 4 Less, Ralphs Grocery Co. and Dominick's. The firm also owns Piccadilly Restaurants and a stake in Barneys New York and is a majority shareholder of Aloha Airlines.
Tesco's UK portfolio includes more than 3,000 stores under seven brands totaling nearly 40 million square feet. In recent years, the retailer has expanded into product types beyond food, including clothing and consumer electronics, as well as international markets like Thailand, where the company operates more than 1,000 stores.
— John McCurdy