Tesco abandons Dunnhumby sale after offers drop from £2bn to £700m

Only marketing agency WPP left round the table after other buyers drop out

Dunnhumby, the "customer science" company behind the Tesco Clubcard, which Tesco subsequently bought, has been taken off the market by the supermarket giant.

The decision was taken after potential buyers cut their offers from around £2bn to just £700m, and announced today as Tesco unveiled its lacklustre first-half financial results. In a statement, the company claimed that it had decided to retain Dunnhumby following a "comprehensive strategic review".

Advertising and marketing agency WPP had reportedly led the pack of interested buyers for the company, and was the final bidder left at the table after Google Ventures, Apax Partners, CVC Capital Partners and TPG, among the potential buyers, pulled out.

One of the reasons for the fall in bidders' prices was the termination of a 50-50 marketing partnership with US supermarket Kroger, which means that Dunnhumby no longer has access to Kroger's customer data, although it maintains a relationship with department store chain Macy's.

However, the lion's share of Dunnhumby's profits are still derived from Tesco and its access to Tesco customers' data, which it resells to packaged consumer goods companies. The sale of Dunnhumby would put that data source at risk and, hence, could potentially undermine the company's business model.

Tesco bought a 53 per cent stake in Dunnhumby for £30m in 2001 in a bid to ensure that rivals couldn't buy out the company responsible for its Clubcard success. It increased its stake to 84 per cent in 2006, before buying out the rest of the shares.

Dunnhumby was put up for sale in January by incoming CEO Dave Lewis, who was brought in as Tesco's sales and profits fell in the UK, and the failures of overseas ventures in the US, South Korea and elsewhere were finally recognised.

The sale was made public in January, and Tesco has been trying to sell the highly rated company, whose core services dovetail with the current trend for big data analytics in customer information.

Dunnhumby today employs around 2,000 staff located in 54 offices in 29 countries.