Thai tycoon launches $6.6 billion buyout to kick off Asian retail push
Thailand's richest man has made a $6.6 billion offer to buy cash-and-carry wholesaler Siam Makro Pcl , the biggest Asia-Pacific M&A deal announced this year, as the tycoon looks to grab a larger share of the country's buoyant retail market.
The country's biggest convenience store chain CP All Pcl , controlled by Dhanin Chearavanont, is gunning to push deeper into Thailand's $80 billion retail sector just two months after Dhanin's surprise move to buy a $9.4 billion stake in Ping An Insurance Group of China from HSBC plc .
Other companies that earlier showed interest in Siam Makro included Berli Jucker Pcl , a trading firm controlled by beer tycoon Charoen Sirivadhanabhakdi and Central Group, Thai media reports previously said.
"CP All is the only bidder to offer the price. It seems like the deal was done before other bidders joined the bid," said a source with direct knowledge of the offer, speaking on condition of anonymity as the deal was confidential.
CP All's offer represents a 15.4 percent premium to Siam Makro's last traded price on Friday, before its shares were halted on Monday pending an announcement.
CP All's $6.6 billion offer for Siam Makro would be the biggest retail M&A in the world this year, and double the size of No. 2 deal, according to Thomson Reuters data.
CP All, one of host of Thai companies sitting on vast cash piles and able to borrow money cheaply, will fund the majority of the acquisition with debt and does not plan to issue new shares, the company said. Dhanin's Ping An stake buy was part-funded with a $5 billion plus loan from UBS , Reuters previously reported.
CP All said the deal would allow the combined firm to use the Makro brand and its properties, and to exercise greater power negotiating prices with suppliers and distributors.
Siam Makro, controlled by privately held Dutch trading house SHV Holdings, has 58 Makro-branded outlets in Thailand, mainly selling food in bulk to hotels, restaurants and smaller retail outlets. It made a 2012 net profit of 3.56 billion baht, up 36 percent year on year, but it has been the country's slowest-expanding retailer as a result of stricter rules on large-sized stores.
RISING COMPETITION
Competition for Thai shoppers' business has intensified since the Chirathiwat family, which owns the country's largest retailer Central Group, bought a stake in the local unit of Japanese-based Family Mart <8028.T> last year.
Lawson Inc <2651.T>, Japan's second-largest convenience store chain, has also formed a joint venture with Saha Pattanapibul Pcl , part of the Saha Group, Thailand's leading maker and distributor of consumer products.
Siam Makro has a market value of $5.7 billion. An offer at or near that price would be the largest domestic acquisition in Thailand's retail sector.
Thai companies have stuck a string of deals recently, helped by cheap bank debt and surging share prices. That took Thai M&A volume to a record $25.9 billion last year.
CP All holds more cash than all but one Southeast Asian retailer, according to Thomson Reuters data, with $1.15 billion in cash and equivalents, just behind SM Investments with $1.8 billion. The world's third-largest operator of 7-Eleven stores, CP All aims to have 10,000 7-Eleven stores in Thailand by 2018.
The joint lead arrangers for financing of the deal for CP All are HSBC , Siam Commercial, UBS , Standard Chartered and Japan's Sumitomo Mitsui, said two sources with direct knowledge of the matter.
Earlier on Tuesday CP All asked for its shares to be suspending pending an announcement. CP All said its board had approved an acquisition that may have an impact on its share price.
Its shares dropped nearly 6 percent on Monday amid expectations it would buy a stake in Siam Makro, raising concern about the need to raise funds.
($1 = 28.6850 Thai baht)
(Addition reporting by Elzio Barreto in HONG KONG, Saranya Suksomkij in BANGKOK, Saeed Azhar in SINGAPORE and Prakash Chakravati at Basis Point; Writing by Denny Thomas; Editing by Alan Raybould and Daniel Magnowski)