Tesco's American nightmare is at an end. Yesterday, Ron Burkle's Yucaipa Companies announced it was purchasing 150 Fresh & Easy Neighborhood Market stores along with the company's distribution and production facilities in Riverside, CA. Some 4,000 current employees of Fresh & Easy will keep their jobs as a result of the deal, which is expected to close within three months.
The deal is being valued at £150 million (roughly $235 million) and Yucaipa will receive a loan for more than half of that (£80 million) from Tesco. The Wall Street Journal reported that Tesco would not receive any money in the deal and was "essentially paying" Mr. Burkle's company to take on liabilities associated with Fresh & Easy.
The chain, which offered prepared meals in stores that were completely self-checkout, made numerous attempts to correct missteps since opening its West Coast locations, but none were sufficiently to convince Tesco's management the investment was worth continuing. The British retailing giant is said to have lost around $2 billion during its five-year attempt to make it in the U.S.
"Tesco should be applauded for giving their customers an affordable, healthy, convenient shopping experience. Its dedicated employees and great base of customers give us a solid starting point to complete Tesco's vision with some changes that we think will make it even more relevant to today's consumer," said Mr. Burkle in a statement. "We plan on continuing to build Fresh & Easy into a ‘next-generation convenience retail experience,' providing busy consumers with more local and healthy access for their daily needs."
No announcement was made concerning the new name of the chain going forward, although speculation has arisen that Yucaipa, which owns the Wild Oats brand name, would use that as the banner. An unnamed Los Angeles Times' source said to be familiar with thinking on the subject said, "There will be an announcement about Wild Oats in the coming months. It will not be the rebranding of the Fresh & Easy stores as Wild Oats."
How likely is Fresh & Easy to succeed under Yucaipa Cos.?