Carrefour collected first round bids last week for its assets in Singapore, Thailand and Malaysia. Tesco is viewed as a leading contender.

Carrefour collected first round bids last week for its assets in Singapore, Thailand and Malaysia. Sources close to the deal say the auction could fetch about $1bn (£647m) and given the retailer’s need to invest both in its key home market and priority emerging markets, such as China, it is likely that Carrefour will aim to get the maximum price.

Tesco is viewed as a leading contender. It is thought to want to buy all 40 stores in Thailand, 19 in Malaysia and two in Singapore. Indeed, Carrefour and Tesco have a track record of swapping stores (as with the Taiwan, Czech Republic and Slovakia exchange), which could bode well for Tesco.

If Carrefour sees financial gain from selling the country operations separately, we believe Dairy Farm would be the firm favourite in Singapore, with local rival NTUC Fairprice also in the running. In Malaysia, meanwhile, there could be several contenders alongside Tesco, including Diary Farm, Japan’s Aeon and a private equity consortium led by Navis.

It is the Thai market, however, where sparks could fly. Troubled relations with the government there could scupper a deal for Tesco, and retailers such as Casino-owned Big C and Aeon (which acquired Carrefour’s operations in Japan in 2005), may be in a better position to gain these assets. It is also worth mentioning that two local players are also in the running for Carrefour’s Thai operations: PTT, Thailand’s largest oil conglomerate, and Berli Jucker, a manufacturing and trading conglomerate.

South Korea’s Lotte Shopping has been conspicuous from most discussions regarding the Carrefour sale - probably because it does not yet have a presence in any of the three markets.

However, we believe that there are a number of factors pointing to it being interested in some of Carrefour’s hypermarkets. Lotte Shopping’s focus is now firmly

on international expansion. After investigating growth overseas for almost a decade, it has plans to become a major pan-Asian retailer. Recent years have seen it use funds from its 2006 IPO to acquire SHV Makro’s Chinese and Indonesian operations in late 2007 and 2008 respectively. Its Chinese presence was boosted in 2010 through the acquisition of local player TIMES.

In Lotte Shopping, we have a regional player actively looking to enter new Asian markets through acquisitions. The sale of Carrefour’s assets in Thailand and Malaysia particularly may prove to be an irresistible lure for it.

Matthew Stych is research development manager for Planet Retail.

Planet Retail

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