SET-listed Siam Makro Plc, the operator of the Makro cash-and-carry store chain, has clinched a 3-billion-baht deal to acquire four food companies to strengthen its retail network.
Makro, through its wholly-owned subsidiary Siam Food Services Ltd, entered into an agreement on Oct 31 to acquire an 80% stake in each of the four food companies: Indoguna (Singapore) Pte, a listed firm on the Singapore Exchange, Indoguna Dubai LLC, Lordly Co Ltd and Just Meat Co Ltd. The latter two are listed on the Hong Kong Stock Exchange.
The combined acquisition costs of the four companies is S$118 million (3 billion baht). The source of funds will come from the company's cash flow and bank loans.
Suchada Ithijarukul, chief executive of Siam Makro, was not available for comment on the acquisition.
A research note from Capital Nomura Securities said investing in the four food companies would be a shortcut for Makro to expand its retail business abroad, especially in Cambodia.
"The food business acquisition will not affect Makro's financial status. Its debt-to-equity ratio is very low at 0.6 times and will rise to 0.8 times after the investment," the note said.
Capital Nomura Securities forecast that Makro's profitability would improve in the second half of this year as pricing competition from its rivals would be reduced. Its full-year net profit, however, is expected to fall by 6% from 5.37 billion baht last year. But 2016 revenue will rise to 167 billion baht from 153 billion last year.
The research house predicted that the fresh food business would complement Makro's retail business next year and its revenue would surge to 180 billion baht in 2017, while net profit would rise 20% to 6.09 billion.
Siam Makro's major shareholder, Charoen Pokphand Group, has its strength in the food and agricultural businesses. CP acquired a 64% stake in the cash-and-carry chain from the Dutch trading company SHV Holdings for US$6.6 billion in 2013.
In late September, Fitch Ratings (Thailand) downgraded Siam Makro's national long-term rating to 'A(tha)' from 'A+(tha)'. The outlook is stable. Simultaneously, Fitch has affirmed Makro's 'F1(tha)' national short-term rating.
This followed a downgrade of the national long-term rating of CP All Plc, which now owns 98% of Makro, to 'A(tha)' from 'A+(tha)'.
Siam Makro recently established a joint venture with local partners to bring its Makro cash-and-carry chain to Cambodia.
The joint venture is 70% owned by Makro ROH Co Ltd, a wholly owned subsidiary of Siam Makro, and 30% by Cambodian investors, with US$2 million in initial registered capital.
This year, Siam Makro plans to open 10 new Makro stores in Thailand, bringing its total outlets to 108 nationwide.
During the first half, Siam Makro posted a net profit of 2.38 billion baht on revenue totalling 85.7 billion.
MAKRO shares closed yesterday on the Stock Exchange of Thailand at 34.25 baht, up 75 satang, in trade worth 14.8 million baht.