The two companies will also form an exclusive long-term partnership, which will combine Tesco’s brand, physical and digital reach and customer focus with Barclays’ financial services capabilities and expertise, for an initial period of 10 years
Barclays and Tesco will also form a long-term partnership. (Credit: Barclays)
UK-based bank holding company Barclays has agreed to purchase the retail banking operations of the British supermarket chain Tesco for a total consideration of £600m.
The two companies also agreed to form an exclusive long-term partnership to provide Tesco-branded credit cards, personal loans, and deposits.
Tesco said that for an initial 10-year period, the partnership will combine its brand, physical and digital reach and customer focus with Barclays’ financial services capabilities and expertise.
According to Barclays, Tesco’s retail banking customer base widely complements its existing customers and will complement its current business.
Also, the partnership would build on its existing UK strategic partnerships with other retail, consumer electronics, and loyalty programme brands, said the British retail company.
The proposed acquisition and partnership are subject to regulatory approval and are expected to be completed in the second half of the calendar year 2024.
Once completed, Tesco will transfer around 2,800 of its employees working on banking products, including the senior management team, to Barclays.
Barclays Group CEO CS Venkatakrishnan commented: “This strategic relationship with the UK’s largest retailer will help create new distribution channels for our unsecured lending and deposit businesses.
“We can bring our expertise in partnership cards developed over decades in the US to enhance further the highly successful Tesco Clubcard loyalty scheme.
“This partnership with Tesco is a further demonstration of the investment we continue to make in our UK consumer business.
“We are looking forward to working closely with the team at Tesco over the coming months to enable a smooth transition and, subject to completion of the transaction, we look forward to welcoming Tesco Bank colleagues and customers to Barclays.”
Tesco said that the partnership will help provide its customers with Tesco-branded banking products and services, benefiting from the Tesco Clubcard loyalty programme.
The company will receive annual income for using the Tesco brand, growing the customer base through Tesco channels and Barclays’ participation in the Tesco Clubcard programme.
It will retain all other existing activities of Tesco Bank, including insurance, ATMs, travel money and gift cards, which are capital-light and profitable businesses.
Tesco said that the sale of its existing banking operations, loans and savings to Barclays will remove £7.7bn of capital-intensive assets and £6.7bn of liabilities from its balance sheet.
Tesco Group CEO Ken Murphy said: “By working with one of the UK’s leading banks, we can bring customers new and innovative propositions, which will continue to benefit from Tesco Clubcard’s unique insight and digital capabilities.
“The transaction will also significantly reduce our financial liabilities, in turn strengthening our balance sheet and allowing us to focus on continuing to grow our core retail business.
“I’m hugely grateful to our colleagues for their dedication and excellent service to our customers, and I’m confident that this new partnership approach will build on that success.”