SUPERMARKET giant Tesco has agreed to pay a £129 million fine from a watchdog to avoid prosecution for overstating its profits in 2014.
The firm also agreed to spend £85m compensating investors who bought shares or bonds between August 29 and September 19, 2014. Its subsidiary Tesco Stores reached a “deferred prosecution” agreement with the Serious Fraud Office following a two-year investigation.
The Financial Conduct Authority (FCA) said the company agreed they committed market abuse in relation to the trading update, which gave a false or misleading impression about the value of publicly traded Tesco shares and bonds.
It is the first time the FCA has used its powers to require a listed company to pay compensation for market abuse.
Tesco issued a corrected statement before the markets opened on September 22, which estimated it had overstated profits by about £250m. This sent its share price plunging and sparked two internal inquiries. However, the overstatement was subsequently revised up to £326m.
Dave Lewis, the company’s chief executive, said: “We sincerely regret the issues which occurred in 2014 and we are committed to doing everything we can to continue to restore trust in our business and brand.”
The High Court will decide next month whether or not to approve the agreement with Tesco Stores.
FCA chief executive Andrew Bailey, said: “Tesco and its board are doing the right thing here, taking appropriate responsibility and agreeing to rectify the consequences of the misconduct. They have cooperated fully with us and this sets a good example for the market and so is a good outcome for Tesco and investors.” Meanwhile, two of Tesco’s major shareholders have voiced their opposition to its £3.7 billion takeover of grocery wholesaler Booker.
Schroders and Artisan Partners own a total of nine per cent of Tesco, and have written separately to the company’s chair John Allan, asking him to pull out of the deal. Tesco requires a majority of shareholders to vote in favour of the deal at a meeting, so the opposition of two significant investors is a setback.
Schroders, one of the City’s best-known fund managers, said the price Tesco was paying for Booker would make creating value for shareholders “extremely challenging”, adding that it would encourage other investors to oppose the deal.
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here