Bidders Circle Carrefour's Southeast Asian Assets

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Bidders circle Carrefour's Southeast Asian assets

by Didier Lauras

BANGKOK, October 3, 2010 (AFP) - A bidding war is heating up for Carrefour's supermarkets in Thailand, Malaysia and Singapore as the French retail giant plans its exit after failing to take a dominant position in the region.

Carrefour, the world's second-biggest retailer behind US colossus Wal-Mart, is looking to offload its 43 Thai, 23 Malaysian and two Singaporean hypermarkets in a sale some estimates suggest could net a billion dollars.

Analysts believe Carrefour's eagerness to sell up reflects the fact that, despite its large foothold and the robust health of the markets, the firm has trailed competitors such as Britain's Tesco in terms of market share.

"Carrefour is the second-biggest retailer in the world. Perhaps being in last place in Thailand is a reason they want to sell their business here," said Jit Siratranont, deputy secretary general of the Thai Chamber of Commerce.

One European banker went further.

"They did not succeed in achieving their goal and getting themselves in a dominant position," he said, but "there is every indication that the market is promising because there are many contenders" to buy the stores.

Carrefour refuses to comment on the matter, but it acknowledges that it is ready to consider offers in the countries where it is not a market leader and has little prospect of becoming one.

It is therefore likely to cede its network in these three major markets, which enjoy steady growth and can rely on a combined population of over 100 million people.

Potential buyers are circling, with a second round of bidding expected by November.

"The long-term potential for these assets makes them worth investing in," Jon Wright, a London-based retail analyst with market intelligence firm Euromonitor International, told AFP.

With a supply chain in place, the task for buyers would be to improve margins to boost profits, he said.

According to Wright, the supermarket sector in Asia was worth 389 billion dollars in 2009 and is expected to grow by 3.3 percent a year between now and 2014, compared with around 2.1 percent growth forecast globally.

In Thailand, a raft of international players have been linked to the bidding in recent weeks, including retailers Tesco, Japan's Aeon and France's Casino.

Thai companies have also been tipped as potential buyers, including retailer Central Group, consumer goods and manufacturing firm Berli Jucker PCL and majority state-owned energy giant PTT.

PTT however recently indicated it was not interested, while the Wall Street Journal has reported Aeon -- which snapped up Carrefour's Japanese assets in 2005 -- as well as Tesco were struck off for bidding too low.

According to Kim Eng Securities strategist Mayuree Chowvikran, Berli Jucker PCL and Casino are likely to be the key bidders in Thailand.

Singapore may be a smaller market but it has an affluent population, including a large expatriate community.

"Those who know how to adapt to the local market are doing relatively well. Despite the competition, there is still money to be made" in the city-state, said Song Seng Wun, a regional economist with Malaysian bank CIMB.

Malaysia also appears to be drawing interest, with deputy trade minister Mukhriz Mahathir telling AFP in August that "other hypermarkets are keen to take over" Carrefour's business in the country.

"There are many suitors," he said.

Carrefour has, paradoxically, recently announced the opening of two new stores in central Selangor state in Malaysia.

Manokaran Mottain, senior economist at AmResearch, said he believed Malaysia offered some interesting opportunities as "the retail market is doing well with domestic spending looking good."

He believed the motivation behind Carrefour's desire to retreat from the market could either be because they are over-stretched, or that they are on the look-out for yet more lucrative markets.

"Definitely India will be a great market. India can provide Carrefour with great potential," he said.

Carrefour will open its first wholesale megastore in Delhi in November and said it has already been in discussion with potential partners over opening traditional hypermarkets there.

-- (c) Copyright AFP 2010-10-03

[gotlost]

Potential buyers are circling, with a second round of bidding expected by November

Nice way of saying the VOLTURES are over us.

[Bagwan]

I don't see that not being No.1 is a reason to move away. Much more likely is that the return on their investment is not as planned and that there are better opportunities to make bigger profits elsewhere. I understand that the French are not the flavour of the month in parts of SEA and the fallout from that also might be a factor.

[Englander]

Everytime i go to this shop the tills are empty and there are always huge queues, wonder if Thailands huge taxation on imported food products is the reason that affects their margins.

[haveaniceday]

Compared to Big C and Tesco, My local Carrefour wins hands down, particularly in the meat department, bakery and imported section. Will mean making an hour drive to Villa more often, so no big deal. One thing that really annoys me though, is, they may have about 20 check outs, with upwards of 50 staff in the store just standing around, yet normally on Mon to Thursday only open 2 (two) check outs and people have to wait for 15-20 mins in line, even if you have 1 item as the 10 item or less is only open on weekends. Many times I have just dumped my stuff and walked out.

I read on a investment site they are bailing these 3 countries to put the capital into India as expected a better return on investment.

Edited October 3, 2010 by haveaniceday

[Ricardo]

Potential buyers are circling, with a second round of bidding expected by November

Nice way of saying the VOLTURES are over us.

I though they mainly invested in electrical-suppliers ?

I couldn't resist.

[BWPattaya]

Haveaniceday mentioned the queues at the checkouts. This is the same in Big C and Tesco. It really annoys me that they have loads of staff, who know little about the products, standing around the electrical section watchung televisions. but they have only a few people on the tills. Why do they have 40 tills but only open three or four. I have left everything and walked away before now. It is so frustrating.

I was in Big C once and an American boss was there trying to educate staff aboout displaying things effectively. He asked me if I shopped there reugularly and what did I think about the place. When I mentioned the checkout queues he turned around and ignored me. Wonderful customer service skills.

Mind you he wasn't very good at educating the staff either. His language did not reflect the skills of his target group, it was clear from their faces that most of them didn't understand a thing he was saying.

[wintermute]

Sadly it looks like Shitco-Lotus and Big C(rap) are going to reign supreme after this. I wouldn't be surprised if Carrefour becomes a part of some massive Thai corporate conglomerate monopolizing the skeletal remains of the chain.

[Beetlejuice]

The vultures and hyenas are battling for the spoils.

Good luck and may the best predator win.

[steve187]

I hope that the company is bought by a new face that will keep Carrefour as it is, or even expand the products, it would be sad to see the larger range of western type products that Carrefour offers, reduced to a smaller range as offered in tesco and big c.

[Englander]

I hope that the company is bought by a new face that will keep Carrefour as it is, or even expand the products, it would be sad to see the larger range of western type products that Carrefour offers, reduced to a smaller range as offered in tesco and big c.

These 3 are almost identical in choice, especially Tesco and Carrefour .. i never understand how anyone prefers one over the other ... Villas and the one in Emporium are the best for choice though theyre ludicrously expensive..

[asiawatcher]

I agree with the idea of competition. It is hard to beat the Tesco junta but Carrefour would only quit if a more lucrative market were available and as mentioned that would be India. To set up in India would cost easily, the amount of this sale so it would be a logical choice to get a monopoly. But competition needs to remain here or Tesco will just creep up the prices a baht at a time and the public will lose out.

[siampolee]

I'll stick with one of the smaller operators in Thailand who aims at the expat market, has a good product range, gives decent service and often at more competitive prices than the big outfits.

My Thai wife will not shop any where else after I finally got her into the store in question 5 years ago. She swears the prices and the products are far better than Tesco , Carretour, Big C and Tops to name four of the bigger chains