CP rival bidder for ParknShop may sell unit to build war chest

CP rival bidder for ParknShop may sell unit to build war chest

China Resources Enterprise Ltd (CRE) is set to launch a strategic review of its Hong Kong meat distribution unit as it readies funds to bid for tycoon Li Ka-shing's ParknShop supermarket business, a person familiar with the matter told Reuters in Hong Kong yesterday.

Mr Li's Hutchison Whampoa Ltd has put Hong Kong's dominant supermarket business up for sale, asking for US$3-4 billion.

The operator of China's second-largest supermarket chain has said it is interested in ParknShop and discussed selling non-core units to fund future acquisitions without mentioning specific assets.

The state-backed CRE has long been seen as one of the front runners in the auction, and a successful bid would give it control of more than half of Hong Kong's $6.6-billion supermarket industry as well as a brand name considered more trustworthy than Chinese brands.

The list of suitors for ParknShop include Thailand's Charoen Pokphand (CP) Group, controlled by tycoon Dhanin Chearavanont, which has teamed up with Carlyle Group, people familiar with the process told Reuters.

Australia's biggest supermarket operator Woolworths Ltd and Japan's Aeon Co also expressed interest, said sources.

But a significant gap remains between the seller's expectations and what suitors are willing to offer, said sources.

One person said the CP-Carlyle consortium has made the highest offer.

The sources declined to be identified because the discussions are confidential, according to Reuters.

One person said CRE has yet to decide whether to sell beef supplier Ng Fung Hong, which it took private in 2000, valuing the firm at HK$5.13 billion (20.7 billion baht at the current rate).

CRE and Carlyle declined to comment. The supermarket chain is expanding food and other retail operations.

In beer, CRE has a joint venture with the England's SABMiller Plc and in beverages has tied up with Japan's Kirin Holdings Ltd.

It also recently formed a joint venture with the British retailer Tesco Plc.

A senior executive of the Charoen Pokphand Group told the Bangkok Post the company is ready to bid for ParknShop to strengthen its retail business.

The group is already a leader in the Thai market. CP All, its subsidiary and operator of 7-Eleven convenience chain, has performed well with more than 7,200 outlets after entering the country 25 years ago with sales of over 200 billion baht a year.

The group's food flagship, Charoen Pokphand Food Plc (CPF), also operates several retail food shops including CP Fresh Mart and CP Food Plus.

In April this year, CP All spent 189 billion baht to take over Siam Makro Plc, the operator of Makro cash-and-carry chain.

A source close to the deal from the CP Group said the move reflected Mr Dhanin's intention to expand his business downstream in 12 countries where CP has a foothold through CP All and CPF. The takeover of Siam Makro enables the group to expand Makro to Asean countries, as well as China, Taiwan and Pakistan.

"Moreover, the group also wants to expand CP Fresh Mart and CP Food Plus to Asean," the source said.

CP Group is also in talks with the parent firm of 7-Eleven in Japan for a licence to operate the chain in Vietnam and China but the Japanese firm has yet to make the decision.

A marketing analyst told the Bangkok Post that as 7-Eleven and ParknShop are archrivals in Hong Kong, Mr Dhanin's move to join the bid for the latter might worry the Japanese firm.

He said sales of 7-Eleven in Thailand now surpass those in Japan, with two-digit growth rates to 106 billion baht.

"Mr Dhanin's move may prompt the Japanese firm to speed up its decision whether to allow the Thai group to expand 7-Eleven to new countries or compete directly with it in Hong Kong if CP wins the bid," the source said.

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