Freshfields and Hogan Lovells advise on Barclays’ £600m Tesco Bank deal

Tesco to unload credit card, loan businesses to Barclays, with the two companies also entering into a 10-year distribution deal

Barclays is proposing to buy the bulk of Tesco Bank Serge Cornu /

Freshfields Bruckhaus Deringer and Hogan Lovells are advising on Barclays’ plan to buy the majority of Tesco’s banking operations for £600m.

Freshfields is advising Tesco on the sale, while Hogan Lovells is advising Barclays. The deal will see Barclays 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.

At the same time, Barclays has entered into a 10-year distribution partnership to sell Tesco-branded financial products. Tesco says it will retain its “profitable, capital-light” business lines including insurance, ATMs, travel money and gift cards. The retailer added that it will use the majority of the cash generated from the sale on share buybacks. The transaction is expected to close in the second half of this year, subject to regulatory approval.

Ken Murphy, Tesco’s CEO, said the sale will allow it to focus on its core retail business, while Barclays’ CEO C.S. Venkatakrishnan said the partnership deal will provide new distribution channels for its unsecured lending and deposit businesses.

The Freshfields team was led by partners Claire Wills and Andy Robinson, alongside senior associates Michael Black and Lucy Cliff. Meantime, finance partner Richard Lister and senior associate Tom Hingley led advice on the partnership deal, with additional transactional support from partners James Smethurst (on financial regulations), Rikki Haria (on competition), Alice Greenwell (on employment), Andrew Murphy (on pensions) and Pete Allen (on finance).

The Tesco legal team was led by group general counsel Adrian Morris, alongside group corporate legal director Andrew Magro, head of legal Lauren Cox, senior legal counsel Charlotte Hart, Tesco Bank legal director and company secretary Fiona Burden and Tesco Bank 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. Halford thanked the Hogan Lovells team for their support in a LinkedIn post, which included regulatory partner Jonathan Chertkow and M&A partner John Allison.

The Tesco deal comes after high street rival J Sainsbury last month said it was scaling back its banking business and would instead sell financial services via third parties, just as Tesco plans to do with its Barclays distribution partnership.

M&A lawyer Mike Barrington at Charles Russell Speechlys commented on the transaction: “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.

“This particular 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 get right and can be heavily negotiated to ensure the deal terms are right for both parties – the devil is often in the detail.”

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