Aeon, China Resources eye bids for Hong Kong supermarket: Sources

Published: 4:10 PM, July 25, 2013
Updated: 8:40 AM, July 26, 2013
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HONG KONG/SINGAPORE – Japan’s Aeon and state-owned China Resources Enterprise are among the suitors considering bids for the Hong Kong supermarket business being sold by billionaire Li Ka-shing, people familiar with the matter told Reuters.

Mr Li’s Hutchison Whampoa conglomerate has set an August 16 deadline for initial bids for the business, with an asking price of up to US$4 billion (S$5.1 billion), said the people, who declined to be identified because the sale process is confidential.

The auction is generating interest from companies and private equity firms, lured by the opportunity to operate in a market that is dominated by two large players. Octogenarian Li is planning to sell the business to focus more on Hutchison’s health and beauty retail operations, which have a bigger global footprint and offer higher margins compared with the supermarket business, the people said.

Australian retailers Woolworths and Wesfarmers and China’s Sun Art Retail Group are among the other suitors evaluating bids, the people added.

“Hong Kong is a saturated market and we can only expect very stable or even flat growth in the supermarket business, which may not be attractive to investors seeking speedy returns,” said Mr Linus Yip, chief strategist at First Shanghai Securities.

“But foreign operators may find it appealing if they want to tap the China market through ParknShop as a stepping stone.”

Mr Li’s ParknShop and Singapore’s Dairy Farm International dominate Hong Kong’s supermarket business. ParknShop has a 33.1 per cent share and Dairy Farm has 39.8 per cent, according to London-based Euromonitor. China Resources’ Vanguard Supermarket has a 7.8 per cent market share.

ParknShop, which operates 345 stores in Hong Kong, mainland China and Macau, earned HK$21.7 billion (S$3.5 billion) in revenue last year, according to a statement issued by Hutchison. About 270 of the stores are in located in Hong Kong.

Thailand’s CP All has decided not to bid for the business with Hong Kong’s high real estate prices seen as a sticking point, one person with direct knowledge of the matter said. CP All, controlled by Thai billionaire Dhanin Chearavanont, plans to use its recently acquired Siam Makro business to expand overseas, the person added.

China Resources, Sun Art and Wesfarmers declined to comment. Woolworths and CP All were not available for immediate comment. A spokesman for Aeon denied that it would participate in the bidding.

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