Barclays has completed the acquisition of the majority of Tesco’s banking operations in a deal that will allow the supermarket chain to return the proceeds of the sale to shareholders.
The agreement, which was announced in February, stipulates that Barclays would gain the credit cards, unsecured personal loans and lending balances from Tesco for about £600 million ($775 million) followed by a further £100 million in cash after the settlement of regulatory capital amounts and after transaction costs.
Tesco Bank’s 2,800 staff will be transferred to Barclays as part of the deal.
The British bank has also signed a 10-year distribution deal to sell financial products under the Tesco brand, which has been operating for 25 years already.
“This acquisition is an important step in increasing our investment in the U.K.,” C.S. Venkatakrishnan, group CEO of Barclays, said in a filing to the exchange. “We look forward to collaborating with Tesco Group on delivering Tesco-branded financial services.”
Tesco is retaining its existing insurance and money services activities, including ATMs, travel money and gift cards because the supermarket chain says they’re “capital-light, profitable businesses with a strong connection to our core retail offer.”
Ken Murphy, Group CEO of Tesco, said: “We are delighted to be working alongside Barclays to unlock even greater value for Tesco Bank customers. Through our strategic partnership, customers will have access to new and innovative propositions, while continuing to enjoy the unique benefits of Tesco Clubcard.
Tesco also said Friday that it would return £700 million to shareholders through an incremental share buyback, which will begin after its ongoing £1 billon buyback program is completed.
Just a day earlier, Tesco’s rival Sainsbury announced that it had agreed to sell its Argos credit-card portfolio to NewDay Group for £720 million. The supermarket chain said in June that would sell its banking business to NatWest.
Many British retailers expanded into financial services in the 1990s, but the results failed to live up to expectations, spurring a wave of consolidation.
Tesco Bank had offloaded its mortgage book to Lloyds Banking Group in a £3.8 billion deal in 2019.