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UPDATE 2-Tesco to return $6.6 bln to shareholders after sale of Thai, Malaysia assets

Malaysia assets@

* Tesco is focusing on UK, selling overseas assets

* Agrees disposal of Thailand, Malaysia assets to CP Group

* Enterprise value of $10.6 billion

* Deal is subject to regulatory approval

* Tesco shares down 3%, outperforming wider market (Adds detail, shares)

LONDON, March 9 (Reuters) - Britain's Tesco plans to return $6.6 billion to shareholders after agreeing to sell its supermarket businesses in Thailand and Malaysia to Charoen Pokphand Group for an enterprise value of $10.6 billion.

The UK's biggest retailer kicked off a review of its Asian businesses in December after receiving interest in the assets, signalling a further retreat from its once lofty global ambitions.

Tesco is five years into a UK-focused recovery plan launched by Chief Executive Dave Lewis after an accounting scandal capped a dramatic downturn in trading. In October Lewis declared Tesco's turnaround complete. He is stepping down in October and will be succeeded by Ken Murphy.

Following completion of the Thailand/Malaysia disposal to the Thai group controlled by Dhanin Chearavanont, Tesco said on Monday it intends to return cash to shareholders via a special dividend with an associated share consolidation. The funds will also be used to top up Tesco's pension deficit.

Shares in Tesco were down 3% at 0815 GMT, outperforming the blue chip FTSE 100 index which was down 8.6% on coronavirus fears.

Citing sources, Reuters reported on Sunday that CP Group was the frontrunner to buy the assets.

"By selling its Asian business, Tesco will be able to further improve margins and revenue growth in its key business segments through better resource allocation," said Oshadhi Kumarasiri, equity analyst at LightStream Research, who writes on research platform Smartkarma.

Tesco said the deal is conditional on the approval of its shareholders and regulatory approvals in Thailand and Malaysia, which is expected during the second half of 2020.

However, lawyers and bankers have previously said CP Group would likely face intense scrutiny from antitrust regulators if it bought the assets.

CP Group runs its 12,000 7-Eleven convenience stores through CP All PCL and about 80 cash-and-carry stores under Siam Makro PCL.

CP Group will gain control of the 1,965 stores Tesco operates in Thailand - much of which the British firm bought from CP Group during the 1997-8 Asian financial crisis - including 200 Tesco Lotus hypermarkets and 1,600 Tesco Lotus Express convenience stores, plus 74 outlets in Malaysia.

Last month, Tesco completed its exit from China with the 275 million pound sale of its joint venture stake to state-run partner China Resources Holdings (CRH).

Completion of the Thailand/Malaysia deal would increase speculation over the future of Tesco's central European division, consisting of stores in the Czech Republic, Hungary, Poland and Slovakia, as it would be its only remaining overseas operation, apart from Ireland. ($1 = 0.7601 pounds) (Reporting by James Davey and Anshuman Daga, editing by Kate Holton and Alexander Smith)