Freshfields and Hogan Lovells Advised Barclays on Buying Operations of Tesco Bank
The £600m worth of transaction is expected to close in the second half of this year
Global law firms Freshfields Bruckhaus Deringer and Hogan Lovells are advising Barclays and Tesco Bank on the former’s plans to buy most operations of the bank.
While Freshfields is advising Tesco on the sale, Hogan Lovells is advising Barclays.
Barclays intends to acquire Tesco’s credit card, loans, and savings business lines, removing £7.7bn of capital-intensive assets and £6.7bn of financial liabilities from Tesco’s balance sheet. About 2,800 Tesco Bank staff will also move over to Barclays.
Barclays has also entered a 10-year distribution partnership to sell Tesco-branded financial products. However, Tesco will retain its ‘profitable, capital-light’ business lines including insurance, ATMs, travel money, and gift cards. It will use much of the cash generated from the sale on share buybacks.
The Tesco deal comes after high street rival J Sainsbury stated last month that it was scaling back its banking business and would instead sell financial services via third parties. Tesco plans to do the same with Barclays’ distribution partnership.
Ken Murphy, the CEO of Tesco remarked that the sale would allow the bank to focus on its core retail business.
Meanwhile, C.S. Venkatakrishnan, the CEO of Barclays stated that the partnership deal would provide new distribution channels for unsecured lending and deposit businesses.
Commenting on the transaction, M&A lawyer Mike Barrington at Charles Russell Speechlys expressed, “Tesco’s decision to sell its banking practice is the latest example of supermarkets divesting non-core businesses to focus on their retail offerings. We anticipate that this trend may continue.”
He added, “This deal envisages an ongoing relationship between Barclays and Tesco, as the bank uses the Tesco brand to sell certain products. Such agreements, designed to endure long after the transaction concludes, are crucial to getting right and can be heavily negotiated to ensure the deal terms are right for both parties – the devil is often in the detail.”
The Freshfields team was led by partners Claire Wills and Andy Robinson, along with senior associates Michael Black and Lucy Cliff.
Finance partner Richard Lister and senior associate Tom Hingley advised on the partnership deal. They were supported by partners James Smethurst (financial regulations), Rikki Haria (competition), Alice Greenwell (employment), Andrew Murphy (pensions), and Pete Allen (finance).
The Tesco legal team was led by group general counsel Adrian Morris, along with group corporate legal director Andrew Magro, head of legal Lauren Cox, senior legal counsel Charlotte Hart, legal director, and company secretary Fiona Burden, and head of legal John Murray.
The Barclays M&A legal team was led by Win Chung, alongside the bank’s head of legal Martin Halford.