After decades of growth, supermarket giant Tesco has been navigating more troubled waters for the past two years.
In 2014 it saw pre-tax profits tumble by 92 per cent after an accountancy scandal that meant its first-half profits were overstated by £250m. This, and its ongoing struggle to compete with rivals, led in 2015 to Tesco announcing an annual loss of £6.4bn – one of the biggest in UK retail history.
Led by new chief executive Dave Lewis, Tesco is seeing a mini revival, announcing better-than-expected Christmas sales and a 6 per cent rise in its share value. But it still has debts of around £8.5bn and needs to rebuild its reputation, so Tesco still faces a long road to recovery.
Legal team
Group general counsel Adrian Morris has been at Tesco since 2012. Morris, who sits on the group executive committee, made his first move in-house in 1995, when he was appointed group general counsel of Europe and Asia at aviation services group BBA. He was later promoted to general counsel at the company, which has since de-merged into Fiberweb and BBA Aviation.
After leaving BBA in 2007, he took general counsel positions at Centrica Europe and British Gas, and then became associate general counsel at BP before joining Tesco.
The Tesco in-house team, based in Herefordshire, comprises 34 senior lawyers. In May 2015, Tesco made David Berry its first legal director when he joined from drinks giant Diageo.
Senior litigation counsel and Allen & Overy alumna Rebecca Law joined in 2013. James Walker is Tesco’s senior counsel for anti-corruption and compliance, having joined in 2014 after periods in private practice at Skadden Arps Slate Meagher & Flom and Morgan Lewis & Bockius.
Former Olswang senior associate Jodie Tattersall, who spent nine years in the law firm’s intellectual property team, joined Tesco as senior legal counsel for IP and marketing in 2014 in her first move in-house.
Having joined in 2009, former Shearman & Sterling associate Jonathan Lagan heads Tesco’s finance, property, procurement and technology legal team and is senior counsel for treasury, corporate finance and tax.
Senior counsel for commercial food Emer Kelly joined Tesco in 2003 and has held roles in data protection, IP and commercial and procurement.
Former Berwin Leighton Paisner (BLP) and CMS Cameron McKenna associate Faye Goss joined the company in 2010 as senior property counsel before becoming group property legal director – a position she has held since 2013. Goss also spent some time as head of legal for Tesco’s Chinese property business, based in Beijing.
Divestment activity
In a bid to balance its books, Tesco has increased its divestment activity as part of its continuing strategy to dispose of assets – specifically its failed overseas portfolios, which are no longer meeting its strategic needs. LMI data shows Tesco’s divestment activity has outweighed both its M&A and joint venture activity since 2012.
Its biggest divestiture to date saw it enter into a conditional agreement with a group of investors, including Canada Pension Plan Investment Board, in respect of the sale of its retail business in the Republic of Korea in September 2015.
Freshfields Bruckhaus Deringer advised Tesco as part of the £4.2bn deal with a London based team including corporate partners Claire Wills, Alison Smith and Simon Weller. Seoul firm Bae Kim & Lee acted as additional counsel.
Property dealings
LMI data shows that much of Tesco’s divestiture and other transactional activity has been based primarily around the real estate sector, in which the supermarket has continued to be a big player. In March 2015, the company completed a £733m property exchange transaction with British Land.
As part of the exchange, Tesco acquired British Land’s 50 per cent interest in 21 UK-based food stores, with British Land in return acquiring
Tesco’s 50 per cent interest in two joint venture portfolios of shopping centres and retail parks.
In August 2015, the supermarket announced the sale of 14 vacant sites located in Scotland to London & Scottish Investments. In October 2015, Tesco sold an additional 14 development sites to funds and clients advised by real estate investment fund manager Meyer Bergman. BLP, led by partner Justine Oldale, advised Tesco on the £250m sale, while Linklaters partner Simon Price advised Meyer Bergman.
In April 2014, long-standing adviser BLP replaced Ashurst as the supermarket’s primary real estate adviser as part of a review of external advisers undertaken by group general counsel Adrian Morris.
BLP and Freshfields currently act as the supermarket’s primary advisers, with a review of this two-strong panel expected to take place in 2016. In February 2016, The Lawyer revealed that Tesco was reviewing the fees it pays to these firms after concerns that the supermarket currently pays too much for its legal services.
LMI data shows that Tesco regularly goes off-panel, favouring firms including Davis Polk & Wardwell, DLA Piper, Charles Russell Speechlys, Pinsent Masons, Jones Day, Mishcon de Reya, Olswang and Squire Patton Boggs – the latter being retained primarily for employment work. LMI data also reveals that Tesco has turned to slightly smaller firms, including Hill Dickinson, Irwin Mitchell and Irish firm William Fry.