CP's Dhanin eyes $10bn Tesco buyback

CP's Dhanin eyes $10bn Tesco buyback

Thailand’s second-richest man is considering buying back his company’s former stake in Tesco Lotus, which has grown into a $10 billion company, a report said Wednesday.

Billionaire Dhanin Chearavanont has begun informal talks with an unnamed Thai bank to explore a bid a controlling interest in Tesco Lotus, which he sold 15 years ago, Reuters' Dealtalk reported, quoting, a person with direct knowledge of the situation.

Tesco-Lotus ranks No 2 in Thailand behind Japan's Seven & I Holdings Co Ltd. It offers a bright spot in Tesco's otherwise grim sales, having generated 3% revenue growth last year. (Bangkok Post photo)

Dealtalk said other investment banks also have approached Mr Dhanin to offer finance and advice on the deal.

The bid would be made through Mr Dhanin's Charoen Pokphand Group, which sold a controlling interest in Lotus to the UK's Tesco in 1998. If successful, Lotus would be the second big retail business Mr Dhanin has bought back.

Reuters was unable to obtain comment on any prospective deal from either CP or Tesco.

Dealtalk cited figures from Euromonitor International that said Tesco ranks No 2 in Thailand behind Japan's Seven & I Holdings Co Ltd and generated 3% revenue growth last year.

Euromonitor predicts Thailand's grocery market will grow 35% to $72 billion by 2019. If Tesco Lotus achieved 6.2% revenue growth in 2015, the chain's sales would total $6.4 billion.

Applying a 1.5 times price-to-sales multiple - the same at which Big C Supercenter pcl trades - Tesco Lotus would be valued at $9.6 billion.

Tesco is looking for a way to raise funds following the crisis over its accounting practices that led to a £263 million (13.8 billion baht) profit overstatement at the world's third-biggest retailer.

Tesco's chief executive Dave Lewis recently told the media that the company was considering several options to pull itself out of the biggest crisis in its history, including a sale of all assets globally, a sale of its business in Asia and raising capitals through partnership deals.

Mr Dhanin and CP likely wouldn't be the only suitors for Tesco Lotus, however. Central Group and Thai Beverage, two of the country's richest business groups, are said also to have expressed interest in buying Tesco's assets in Asia.

Dhanin Chearavanont, chairman of the Charoen Pokphand Group, sold a controlling stake in Lotus to Tesco in 1998. He’s now considering buying it back. (Bangkok Post photo)

On Nov 2, an industry source told the Bangkok Post that Central seemed to the strongest in terms of capital given its low level of debt and high capacity to borrow capital for new investment. CP Group was said to be highly leveraged while ThaiBev has borrowed a huge amount of capital recently for expansion, including the purchase of Singapore's Fraser and Neave.

People familiar to CP said the group would wait for Tesco's decision. However, Tesco's Thai assets may not suit CP's strategy after it bought Siam Makro for 188 billion baht. The purchase strengthened its retail business to include 7-Eleven and hypermart-Makro, in the country.

"CP has seen its operation here is quite strong, it may not worthwhile to pay massive money for Tesco in Thailand only. But the operation overseas would well suit the regional expansion strategy," said people close to the group.

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