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Hong Kong rents hinder billionaire Li’s supermarket sale

HONG KONG – Soaring Hong Kong rents, which helped make Mr Li Ka-shing Asia’s richest man, are now becoming a hindrance as the tycoon looks to sell ParknShop, the city’s second-largest grocery chain, the Bloomberg news agency reported.

HONG KONG – Soaring Hong Kong rents, which helped make Mr Li Ka-shing Asia’s richest man, are now becoming a hindrance as the tycoon looks to sell ParknShop, the city’s second-largest grocery chain, the Bloomberg news agency reported.

Shop leases have doubled over the past four years in Hong Kong, according to property agent Savills.

Meanwhile, with the grocery market approaching saturation, sales growth in the industry slowed to 7.9 per cent in May from last year’s annual increase of 11 per cent and a 2011 peak of 13 per cent, government statistics show.

Bidders “are going to be pretty cautious,” said Nomura analyst Benjamin Lo. “A buyer must take into account the rising costs, especially the high rents in Hong Kong, as they are going to affect the retailer’s profitability.”

Mr Li’s biggest company, Hutchison Whampoa, is seeking US$3 billion (S$3.8 billion) to US$4 billion for its ParknShop supermarkets and has asked potential buyers to submit bids by August 16, according to people with knowledge of the process.

In a statement last month, Hutchison said it is conducting a strategic review of ParknShop and there is no assurance the process will result in a sale. If the conglomerate does not get a good price, it could keep the chain, Nomura said. The company declined to provide an update on its review this week.

A price of about US$3 billion would be “reasonable” given ParknShop’s 2012 sales of US$2.8 billion, said Mr Jason Song, an analyst at Guotai Junan Securities in Hong Kong.

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