Tesco to sell 21 stores in a property deal

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Tesco Plc, Britain's biggest food retailer, raised 570 million pounds ($1.12 billion) by selling a 50 percent stake in 21 stores to British Land Co., to help pay for the company's expansion and share buybacks.

A statement from the group said: "The 50-50 joint venture enables Tesco to release funding for its future growth, while maintaining the flexibility to operate and adapt its property assets.

"The joint venture takes advantage of attractive conditions within the debt and equity markets, being reflected in an initial yield of less than 4.5 per cent."

Tesco will sell 21 of its UK stores to the joint venture it has set up and lease them back. Tesco will invest the proceeds of the 20-year joint venture in growing its retail business.

The deal is the second phase of a sale and leaseback programme announced in April last year. It follows a similar deal struck this January with British Airways Pension Fund, which raised £445 million for the retailer.

Tesco has three other property ventures with British Land, including four retail parks, shopping centres and a further 13 Tesco stores.

In January Tesco announced it had entered into a similar deal with the British Airways pension fund, which is itself expected to generate funds of £445 million.

Tesco Chief Executive Officer Terry Leahy said 11 months ago that the proceeds from property sales would cover a 1.5 billion pound share buyback and fund an expansion in the U.S., China and South Korea.

Shares of Tesco gained 7 pence, or 1.6 percent, to 442.75 pence in London. British Land's stock rose 21 pence, or 1.4 percent, to 1,558 pence.

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