Kata Rocks
Oak Maedow Phuket BRITISH INTERNATIONAL SCHOOL, PHUKET Kata Rocks
The Phuket News Novosti Phuket Khao Phuket

Login | Create Account | Search


Tesco purchase tempts CP

BANGKOK: Charoen Pokphand has acknowledged considering the possibility of acquiring a controlling stake in Tesco Plc’s Asia business, an operation the group sold almost two decades ago.

economics
By Bangkok Post

Tuesday 14 January 2020, 03:44PM


A Tesco shopper in Bangkok. The chain has 1,967 stores in Thailand. Photo: Wisit Tham-ngern / Bangkok Post

A Tesco shopper in Bangkok. The chain has 1,967 stores in Thailand. Photo: Wisit Tham-ngern / Bangkok Post

Any deal would depend on the results of a feasibility study that CP Group is conducting of the purchase, and no concrete decision has been made yet, according to a high-ranking source close to the matter.

“The feasibility study is a time-intensive process,” the source said. “The factors that determine whether we acquire Tesco or not are shifts in consumer behaviour that prompt retail operators to adapt. From the tremendous growth in consumer use of e-commerce to the rise of personalised mobile shopping apps and elaborate in-store shopping experiences, retail is in a state of conventional disruption and vital transformation.”

The source said CP has to consider the organisation’s adaptability to combine Tesco with CP Group’s strengths and advantages, which include using the group's technology businesses to support the changing expectations of consumers.

“We have to consider that if we acquire Tesco, can we address these changes head-on to meet consumers’ needs and deal with key preferences that are changing the way retailers operate,” the source said. “Given this fast-moving climate of change and disruption, CP has to rethink traditional strategies and our capabilities before making a decision [whether to buy].”

CP previously sold most of its stake in Tesco in 2003. Any deal would likely be CP’s second-largest acquisition after buying a US$9.4 billion minority stake in China’s Ping An Insurance in 2012.

Tesco has 1,967 stores in Thailand and 74 in Malaysia and had a 28% share of the Thai grocery market in 2018, according to Euromonitor.

As for the financial capability to buy Tesco, which is estimated to be worth US$9bn, the source said CP already has the capability to raise the necessary funds.

“We need to explore best practices of whether the buyback will increase the effectiveness and efficiency of our group's systems, operations and plans to cope with today’s demanding and dynamic marketplace,” the source said.

According to the Financial Times, Central Group and TCC Group are also considering the acquisition. PTT, Thailand’s state-owned energy company, plans to make a bid as well, according to Reuters. Bids are due Jan 15.

But the chief executive of PTT Plc denied that subsidiary PTT Oil and Retail (PTTOR) will bid for Tesco’s operations, saying the supermarket business is not part of the group’s core competency, so the company does not plan to purchase the assets.

PLAYING MONOPOLY?

The trade commissioner and commission spokesman Santichai Sarathawanphaet reiterated that Thai firms wishing to bid for Tesco need to thoroughly consult the Trade Competition Act and first receive permission from the Office of Trade Competition Commission (OTCC).

“The prospective buyers of Tesco’s Thai operations tend to be big players and dominate the retail market,” Mr Santichai said. “If the purchase falls within the scope of market dominance, the buyers need to ask for permission. They thus need to thoroughly study the retail market structure, its impact on the overall market and benefits to consumers and the overall economy.”

Violation of the law would bring a penalty of 0.5% of the transaction value of the purchase.

Thai Residential

The act outlines a general framework for merger requirements, whereby prior approval from the OTCC is required if a merger transaction could result in a market monopoly or create market dominance (with market share in the previous year of over 50% and at least B1bn in turnover; or the top three business operators, in any goods or services, with combined market share in the previous year of over 75% and at least B1bn in turnover).

Any merger that causes a significant reduction in market competition must be reported to the OTCC within seven days of the date of the merger.

Mr Santichai said the office is keeping a close watch on the issue and informed related businesses to take caution and comply with the Trade Competition Act, adding that the authorities are ready to take legal action against violators if they are found to breach the act.

RETAIL WARS

Ratchaphum Jongpakdee, deputy managing director of Colliers International Thailand, a property consultancy firm, said Central Group may gain the most if it wins the bid, given that Central doesn’t have this specific retail segment under its portfolio. The company is also planning expansions in both Thailand and Malaysia.

A former executive at CP said the group had wanted to buy some stakes back from Tesco in the past several years, but Tesco baulked at the time because its performance was going well in Thailand.

“No matter who wins the bid, they have to confront the Trade Competition Act,” said a source who asked not to be named, noting a lack of confidence that the Commerce Ministry can actually enforce the law.

An industry source in the retail industry said Thailand’s big three retail tycoons are eager to buy up Tesco, adding that the offering will create cut-throat competition in Thailand’s B3.8-trillion retail market.

“Having the Tesco network asset for almost 2,000 stores under the portfolio will become a big engine to extend their business empire to be more stable and sustainable,” the source said.

“It is the biggest international hypermarket chain in Thailand,” another source said. “All three cash-rich companies have the same chance of winning depending on the money they allocate.”

 

Read original story here.

 

Comment on this story

* Please login to comment. If you do not have an account please register below by simply entering a username, password and email address. You can still leave your comment below at the same time.

CAPTCHA

Be the first to comment.

 

Have a news tip-off? Click here

 

Phuket community
Phuket wet weather forecast to continue

And how about someone looking into the discharge of sewage into Kalim Bay. After a few months of ni...(Read More)


Missing Brit found safe

To Clarify: I met this English Dude. In the Prison. I was set up in a shakedown. They wanted half mi...(Read More)


Missing Brit found safe

"There are a great many opinions in this world, and a good half of them are professed by people...(Read More)


Patong to host big bike event

K,what do you mean by saying" Let's hope"? Are you thinking about to join the party ? ...(Read More)


Four-day holiday announced for Sept  

All these holiday throwing make me think about the time of the Romans. ..."Give them bread and ...(Read More)


Missing Brit found safe

@P. I don't know why and what for you grip the word 'arraigned' to be able to give a neg...(Read More)


Missing Brit found safe

DEK...thanks for sharing your obviously extensive experience with noodle soup, drunk driving and acc...(Read More)


Patong hotels, beach chair operators move to change Phuket’s reputation as expensive

A taxi would be at least B1,600 (B800 each way) to/from the airport, plus B200 each time a taxi is t...(Read More)


Phuket wet weather forecast to continue

They are are close to capacity - I cycled past Bang Wad last week...(Read More)