SFO

Tesco has reached an agreement in principle with the UK Serious Fraud Office to avoid prosecution for the accounting scandal of 2014.

It also announced it has agreed to pay a £129m fine with the UK Financial Conduct Authority to establish a compensation scheme for Tesco investors who bought shares between 29 August 2014 and 19 September 2014, which is set to cost Tesco £85m.

Here is how analysts and other experts reacted.

David Beadle, vice president, senior credit officer at Moody’s: “We have previously said that we expect the impact of any potential fine or settlement agreement with the SFO to be manageable in the context of Tesco’s strong liquidity. Today’s announcements, including the company’s expectation of taking an exceptional charge of £235m in respect of the penalty, the compensation scheme and related costs, confirm this view.”

Bruno Monteyne, senior analyst, Bernstein: “Tesco has now settled three out of the four challenges: USA investors (ADRs settled November 2015), the SFO and the FCA. That leaves one more issue from the past to be dealt with: possible lawsuits by European-based investors. There is no progress on that: there are occasional reports about groups of investors filing a claim, but clearly not enough in their cases to make any real progress. The short period of time covered by both the SFO ruling and the FCA ruling seems to imply very limited opportunity for these cases to extract large compensation. In addition, investigations into individuals by the SFO remain outstanding but this will not impact Tesco.”

Clive Black, head of research, Shore Capital: “Shore Capital welcomes the announcements of these agreements between Tesco and the UK authorities. We believe that Dave Lewis engaged in corporate wonders in keeping Tesco stable at the time of this crisis and all shareholders should be thankful for his skills in navigating the business through the choppiest of waters. The announcement of the settlements brings to an end, hopefully, a damaging chapter for the business so allowing for further focus on the current day job. …awaiting on CMA regarding merger regarding Booker.”

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