TSCO Tesco Plc

By Philip Georgiadis 

LONDON-- Tesco PLC said on Thursday it has reached agreement in principle to pay $12 million to settle a class-action lawsuit in New York over an accounting scandal that tarnished the retailer's reputation.

The lawsuit against Tesco and some of its former directors was launched on behalf of the holders of the No. 1 U.K. grocery chain's American depositary receipts, about 2% of its total shareholder base.

The litigation came after Tesco admitted in September 2014 that it had overstated its first-half profit for the year by GBP250 million ($378.1 million), which it later revised to GBP263 million. The overstatement related to commercial income, which includes promotional money, discounts and rebates from suppliers.

The U.K.'s Serious Fraud Office has opened a criminal investigation into Tesco's accounting practices, the results of which are expected soon.

This year, Tesco's board came under fire from shareholders over what was described as the worst period in the retailer's history, with the accounting crisis compounding poor results and a slump in the share price.

Tesco shares, which have fallen nearly 33% since April, were up 0.8% to 170 pence in morning London trading on Thursday.

Tesco, which is in the midst of a turnaround plan under Chief Executive Dave Lewis, said the settlement is subject to confirmation by a New York court. There is no admission of liability.

If completed, the settlement will clear up one of two claims before U.S. courts which arose out of the accounting error. There is another pending in Ohio, Tesco said.

(A version of this article originally appeared on WSJ City, available for download from the Apple App Store.)

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(END) Dow Jones Newswires

November 26, 2015 06:52 ET (11:52 GMT)

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