Central Retail Corporation (CRC), the SET-listed retail arm of Central Group and the country's biggest mall operator, has launched a tender offer for all shares of COL Plc at 19 baht per share for a combined 12.16 billion baht.
According to CRC's statement to the Stock Exchange of Thailand, the board on Sept 14 resolved to approve the acquisition of COL, a business leader in office supplies, books, entertainment media, lifestyle products and e-books under the OfficeMate and B2S brands, plus Meb E-Books, through a tender offer for all securities of COL and to de-list such securities from the SET.
The proposed deal will be made by PBHD Ltd, a wholly owned subsidiary of CRC.
COL, formerly known as OfficeMate, was set up by the Ounjai family 25 years ago. It merged with Central Group in 2012, with Central holding 75% of its stake now.
COL offers more than 20,000 items across the country. The company operates 75 OfficeMate stores, 44 of which are in Greater Bangkok, eight in the South, seven in the central region, six in the Northeast and the rest in other areas.
Yol Phokasub, CRC's chief executive, said the offer aims to combine the strengths of OfficeMate, B2S and Meb to enhance the coverage of CRC's retail portfolio as a leading omnichannel retail platform.
The move is in line with CRC's strategy for leadership in a diverse range of retail product categories, formats and channels (multi-format and multi-category) both in Thailand and overseas.
The company will expand the success of Thai brands through CRC's global retail channels, such as in Vietnam. The deal will fully extend CRC's leadership in continuously growing omnichannel platforms and better meet the needs of customers, Mr Yol said.
"COL's strength is to have channels in both brick-and-mortar stores and a significant online presence, as well as making sales through its call centre," Mr Yol said. "This will enable CRC to expand its customer base into new groups, particularly business-to-business and the younger customer segment, which is key for COL.
"The deal will facilitate sales through other CRC retail brands such as Thai Wasadu and PowerBuy, and will add business opportunities for both CRC and COL to grow their businesses securely, both domestically and internationally."
He said the buyout plan will also significantly improve the customer experience at COL in terms of product range and leading brands available through one-stop shopping.
COL's suppliers and partners will also gain from more channels with greater coverage for their products through CRC's omnichannel platform.
According to a statement to the Stock Exchange of Thailand, the proposed transaction will enable CRC to increase its revenue and profit given COL's strong profit margin and financial position.
Moreover, the company and COL will have an opportunity to manage their business operations more efficiently through economies of scale, SKU rationalisation, joint procurement and elimination of future related-party transactions between the group of companies and COL if COL becomes a subsidiary of CRC without any directors, executives or related persons of the company as a major shareholder in COL.
"CRC's plan to acquire all 640 million COL shares is still subject to regulatory approval," Mr Yol said. "It is a cash offer for COL shareholders at a price of 19 baht per share, valuing their shares at 12.16 billion baht. The acquisition is expected to be completed within the first quarter of 2021."
The sources of funds for the tender offer will stem from the company's working capital and/or loans from the group of companies and/or financial institutions.
With 320 million baht in registered capital, COL reported 10.31 billion baht in total revenue in 2019, up from 11.1 billion baht in 2018 but down from 12.2 billion baht in 2017. Profit was 775 million, 728 million and 498 million baht for the last three respective years.
Tareetip Wongsaengpaiboon, senior vice-president of Kasikorn Securities (KS), said the deal is positive for CRC, but the financial performance of both CRC and COL will likely not return to normal by 2021, as the retail sector was one of the primary victims of the Covid-19 pandemic.
She estimated a target price for CRC at 34 baht per share midway through next year, up from 28.50.
"This deal will be completed in the first quarter of next year, in which COL's profit will have not yet returned to pre-Covid levels," she said.
Ms Tareetip said KS projects COL's profit next year at about 400 million baht or about half of the 700 million baht it made in profit in 2019.
KS and Yuanta Securities said the price of the deal is not expensive compared with the price/earnings ratio of retail business at 25-27 times.
Natapon Khamthakrul, vice-president of Yuanta Securities, said CRC will benefit from the synergy between COL stores and its existing retail properties.
Thanadech Rungsrithananon, senior vice-president of UOB Kay Hian Securities, said the deal is part of CRC's strategy to expand through acquisitions, new sales channels and steady profit growth.
COL has scheduled an extraordinary general meeting of shareholders for the de-listing of COL on Oct 21.
CRC shares climbed to a high of 28.50 baht on Tuesday and closed the day at 28.25 baht, an increase of 6.6% from Monday's closing price, in trade worth 770.1 million baht.
COL shares moved in a narrow range of 18.60-18.80 baht and closed at 18.70 baht, up 14% from Monday's closing price, in trade worth 315.1 million baht.