CP All Plc, the local operator of 7-Eleven convenience stores in Thailand, is extending its market dominance in the 2.2-trillion-baht retail market with the acquisition of Siam Makro Plc's cash-and-carry chain for 188.88 billion baht.
Dhanin Chearavanont (fourth from right) of CP Group and Stephan Nanninga (third from right) of SHV Nederland NV pose with Korsak Chairasmisak (fourth from left) of CP All after signing the contract in Hong Kong Tuesday.
The acquisition will not only allow CP All sales to reach 300 billion baht but also add new customer groups _ restaurants, hotels, caterers and small businesses.
The retail giant's bargaining power with suppliers and manufacturers will also increase, with more sales channels both domestically and internationally.
The move by CP All, a retail subsidiary of Charoen Pokphand (CP) Group led by billionaire Dhanin Chearavanont, is similar to moves by whisky tycoon Charoen Sirivadhanabhakdi, who likes to take over related businesses to drive growth.
After a 10-day negotiation, Korsak Chairasmisak, the chief executive of CP All, signed a purchase agreement with Stephan Nanninga, the director of SHV Nederland NV (SHV), in Hong Kong Tuesday morning.
SHV is the Dutch parent company of Siam Makro.
CP All beat out two other Thai retailers _ Berli Jucker and Central Retail Corporation _ to buy SHV's 64.346% in Siam Makro at 787 baht a share, or US$4.239 billion via tender offer. The two are thought to have a solid relationship because they jointly formed Siam Makro to run the cash-and-carry chain in Thailand in 1988.
"Mr Dhanin has been a long-time friend of the former chairman of SHV for 20 years. He told SHV if it wanted to sell Siam Makro, CP Group should get the first chance to buy it," said Mr Korsak.
CP All agreed to buy the remaining 35.654% for $2.349 billion. The total deal is valued 188.88 billion baht.
It is the largest merger and acquisition transaction globally in the retail sector this year, and the largest M&A in Asia-Pacific as well, according to Thomson Reuters.
CP All only owns the rights to operate 7-Eleven stores in Thailand. It wants to use Makro to penetrate other Asean countries, with the region slated to become a single market with 601 million people in 2016.
"We can open Makro in every country in Asean as well as China and other Asian countries except India. Laos and Vietnam are the top two priority markets for Makro stores," said Mr Korsak.
Laos, Cambodia, Vietnam and Myanmar buy mostly Thai products at the borders. Makro stores in these countries are expected to create sales opportunities for consumer products, frozen food, instant food and agricultural raw materials.
The takeover deal is being scrutinised by the Commerce Ministry, which fears it could create market dominance breaching the Trade Competition Act.
Vatchari Vimooktayon, the commerce permanent secretary, said officials are examining whether the move violates the Act.
About the author
- Writer: Pitsinee Jitpleecheep
Position: Business Reporter