The challenge

In early 2020, Tesco agreed to sell its Thailand and Malaysian businesses for US$11bn. The transaction was large and complex. It required a 62-stage process to complete the sale, with each step being interdependent of each other, involving 42 different banks and two major law firms.

To ensure all criteria was met, the company wanted one of its in-house banks to help guide the transaction.

The solution

Tesco chose a bank to partner with which had global capabilities and the ability to handle all currencies involved including Thai baht, Malaysian ringgit, US dollar and British pound sterling. The bank also had the robust technology and systems necessary to process the transaction and track payments in real-time.

“We needed to ensure our chosen relationship bank formed good connections with all other banks involved in the transaction,” explains Pritesh Vadolia, Head of Treasury – Risk.

Tesco created a core team that included CP Group’s acquiring bank at one end and Tesco’s receiving bank on the other side, with the company’s treasury and legal teams sitting in the middle. This core team met on a weekly basis for six months in advance of the transaction to uncover the most efficient way to handle and meet local requirements around exchange controls and hedging. The team also mapped out plans to road-test its routing in advance to ensure success, since it had only one attempt to get it right.

The transaction involved a multiple-step process with 35 different flows that needed to happen across global borders and time zones. Each part of the transaction had to follow in chronological order at unprecedented speed through multiple banks and two legal firms in addition to the acquiring and receiving banks because each part of the transaction had a certain cut-off time depending on the currency or exchange control. To ensure this happened, Tesco needed a solution that allowed all parties to monitor the movement of monies and confirm instantly when they had been remitted and received.

Best practice and innovation

Due to the interdependency of the individual transactions making up the larger transaction, if one part failed, it would break the rest of the chain. The last time Tesco undertook a similar transaction in 2016, some banks in the chain insisted on using fax machines in certain countries to confirm the receipt of monies causing significant delays

This time, by relying on its in-house bank’s payments and project management expertise, Tesco was able to handle multiple large currency transactions across Thailand, Malaysia, the United States and the UK simultaneously. This included using a mix of technology solutions, ranging from the bank’s proprietary online banking platform and host-to-host connection, to SWIFT gpi, which allowed the company to track transactions in real-time throughout the payment’s journey.

This meant the entire process could take place electronically, critically important since everyone involved was working from home due to the COVID-19 pandemic. As the transaction moved through each stage, SWIFT gpi made it possible for all parties to see instantly where money was in the chain. This allowed the lawyers to proceed to the next stage in the chain.

Key benefits

• Meticulous planning ensured the transaction executed successfully.
• Major contribution to Tesco pension fund announced.

“This transaction involved a team of 35 people based in several locations working for 24 hours to follow the monies as they moved through each of the stages. The transaction took place and was closed before the UK opened for business. This allowed us to confirm to the market that the sale had been completed by 7:30am. Shortly after, we transferred the £2.5bn contribution to the Tesco Pension Fund, successfully fulfilling our public commitment to supporting our employees,” says Vadolia.

The Adam Smith Awards is the industry benchmark for best practice and innovation in corporate treasury. The 2021 Awards attracted a record-breaking 309 nominations spanning 40 countries. To find out more please visit: https://treasurytoday.com/adam-smith-awards.