An attempt by Berli Jucker Plc (BJC) to buy Metro Group’s cash-and-carry unit in Vietnam was aborted yesterday after its shareholders voted unanimously to reject the €655-million (25 billion baht) deal.
The rejection was made because minor shareholders were worried that BJC would face high financial and litigation risks to pursue the transaction under the additional conditions related to the payment of the purchase price.
BJC agreed last August to buy out Metro Cash & Carry Vietnam Ltd, the Vietnamese operation of Germany’s Metro Group. Then both sides entered the additional conditions for the deal payment in October.
The conditions required BJC to deliver a letter of guarantee worth €655 million to the seller within two business days before the submission of documents to the Vietnamese government authority for the amendment of the investment certificate.
If the government required payment evidence prior to the amendment of the investment certificate, BJC would have to transfer another €655 million to Metro Vietnam’s capital account in advance.
Weerawong Chittmittrapap, an independent director of BJC, said the company might have to use €1.31 billion to complete the acquisition.
“If the shareholders voted to support Metro Vietnam’s purchase under the new conditions, BJC would have a lot of financial burdens and risks,” he said.
The company might have to obtain massive loans of up to 40.52 billion baht and its debt-to-equity ration would increase to 1.99 times.
JayDee Partners, an independent financial adviser to BJC, also gave its opinion to shareholders that the purchase of Metro Vietnam under the additional conditions (or the supplemental deed) was not suitable as it may incur risks and negative effects to BJC both financially and legally.
If BJC was unable to obtain sufficient financing to enter the transaction, it would be exposed to high legal risks resulting from an inability to perform its duty according to the sale and purchase agreement, said JayDee Partners.
Mr Weerawong said TCC Holding, owned by billionaire Charoen Sirivadhanabhakdi, the largest shareholder in BJC, would keep talking with Metro AG about how to make the Metro Vietnam purchase deal fairer and successful for both sides.
“If both sides could solve all hurdles and make the deal move forward with fairer conditions, TCC Holding will propose it to the BJC shareholders’ meeting again,” he said.
If BJC’s shareholders excluding TCC Holding vote to accept the deal, the company could go ahead and handle the payment on its own.
But if BJC shareholders turn down the deal again, TCC Holding will take over the deal and find financing to acquire the Metro Vietnam operation on its own.
Mr Charoen wants to acquire Metro Vietnam so that he can have a solid retail network to distribute his products and fulfil his dream. His business spans beverages, property, trading, insurance and manufacturing.
If he owned Metro Vietnam, he would like to sell Thai products in the network, which would help him to penetrate the Asean market.
The German retailer entered the Vietnamese market in 2002. It employs 4,000 staff and generated sales of US$692 million in fiscal 2013.
Metro Vietnam controls a 22% share of the country’s modern grocery market and is the biggest foreign retail player.
BJC shares closed yesterday on the Stock Exchange of Thailand at 41.50 baht, up 50 satang, in trade worth 17.1 million baht.