Casino subsidiary Big C has emerged as the surprise purchaser of Carrefour’s assets in Thailand.
Casino subsidiary Big C has emerged as the surprise purchaser of Carrefour’s assets in Thailand. Carrefour announced the signing of an agreement with Big C, stating that transaction, with an enterprise value of e868m (£726.9m), is expected to close in the first quarter of 2011. Carrefour said the decision to sell its Thai operations is part of its strategy to focus resources on markets where it holds a leadership position and optimise its capital employed.
Carrefour’s 42 stores in Thailand ranked it as the fifth largest retailer in Thailand. With limited growth prospects due to the dominant position of CP All, the local based convenience store retailer and owner of the 7-Eleven franchise for the country, and the strength of Tesco through its multi-format store portfolio, Carrefour’s decision to exit the market follows its corporate strategy.
Many observers had expected Tesco to secure Carrefour’s assets in the country, with outgoing chief executive Sir Terry Leahy having been quoted as saying “makes sense” to purchase the stores. The caveat that he added was that the acquisition “depends on price”. With Carrefour putting its assets that totalled 61 stores in Malaysia, Singapore and Thailand on the block for an estimated value of £643m, it would seem that Casino has paid over the odds.
Casino is present in Thailand via its 66% stake in Big C, which is one of the leading hypermarket chains in Thailand with over 60 stores. The company is also growing its presence as a convenience operator with the Mini Big C banner. The acquisition of Carrefour’s assets will add an estimated £585m to Casino’s sales revenue and propel it from the fourth largest retailer in Thailand with sales of about £850m to the third largest just behind Tesco whose sales revenue in the country in estimated at £1.67bn.
With Tesco and Casino firmly positioned as the largest hypermarket operators in the country it will be interesting to see how the market develops. The Thai government has already taken steps to restrict the growth of large format stores in the country and is likely to further restrict growth now that two companies own the majority of large stores in Thailand. For Tesco missing out on the acquisition will come as a blow. However, its focus in Thailand is mainly on small format shops and paying over the odds for large stores clearly did not appeal. The battle in Thailand will now focus on Tesco’s Lotus Express format against CP All’s 7-Eleven stores.
Greg Hodge, research director, Planet Retail. For more information contact us on:
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