Casino’s Thai Big C and Vietnam assets attracting Asian strategics
* HSBC and BNP Paribas advising Casino
* Package deal potential played down
* Thai players aggressively looking at Big C
Asian retail players are lining up to acquire French hypermarket operator Groupe Casino’s [EPA:CO] Southeast Asian assets, buyside sources familiar with the situation said. Of particular interest is Casino’s 58.6% stake in Big C Supercenter [BKK:BIGC], Thailand’s largest hypermarket chain.
HSBC and BNP Paribas are advising Casino on the sale of its assets, it was said. BNP Paribas declined comment. HSBC could not be reached for comment.
Casino said last week that it received expressions of interest for its Thailand business in conjunction with the ongoing sale of its Vietnam operations. The French retailer is under pressure to reduce debt and has initiated a more-than-EUR 2bn deleveraging plan, including potential non-core divestments. Casino has also been targeted by the short seller Muddy Waters.
Casino has a 58.6% stake in Big C, which has a market cap of THB 185.66bn (USD5.1bn; EUR 4.7bn). According to Thailand’s takeover rules, a mandatory offer is triggered when a party acquires 25% voting rights of a target.
Casino itself has a market cap of EUR 4.2bn. The company’s Vietnam operations had close to EUR 600m in revenues in 2015, according to a company presentation.
Domestic interest
Local Thai players are aggressively looking at Big C, sources said. In particular, TCC Group, whose unit Berli Jucker [BKK:BJC] recently acquired Metro Cash and Carry’s Vietnam business, was named by two sources as a strong contender for one or both assets. Central Group, Thailand’s largest, private retail conglomerate, is looking at the Vietnam business aggressively, one source said. It could also be looking at Big C, given that it retains a small minority stake of around 3%, and that it was the previous owner before Casino acquired it, it was said.
The Chirathivat family behind Central Group is Asia’s 14th richest family with an estimated net worth of USD 11.7bn, according to Forbes’ Asia rich list 2015.
“To be honest, I struggle to see who could outbid a Thai group for this,” said one source.
A Berli Jucker spokesperson said they have not heard from management on this situation. Central Retail Corporation, Central Group’s retail arm, could not be reached for comment despite several phone calls.
Berli Jucker would likely be backed by parent TCC, the holding company for Thailand’s richest family, the Sirivadhanabhakdi family, one source said. TCC is most known for controlling SGD 17.2bn (USD 12bn) beer giant Thai Beverage.
Berli Jucker by itself cannot afford a bid for Big C, with its net debt of USD 390m and TTM EBITDA of USD 174m, according to this news service’s analytics. The company is required to maintain an interest bearing debt to equity ratio of 1.75, which means the company can only raise an additional debt of USD 481m, based on its 3Q15 report. If the company chooses to issue new shares to finance the bid, it could lead to a 79% dilution of the existing share capital.
Japanese retailer Aeon has big plans in Southeast Asia and is taking a look at Big C, two sources said. It could potentially go head to head with Thai bidders for the asset.
The Jardine Matheson Group, which owns pan-Asian food retailer Dairy Farm, could also take a look at what is on offer and afford Big C, one source said. Jardine Matheson is known as a disciplined buyer that does not enter high-profile bidding wars, the source added.
Aeon has a net debt of USD 10.2bn. The Jardine Matheson Group has a net debt of USD 7.19bn.
Bidders could come from the lesser expected Philippines, in light of recent outbound M&A activity from the country, one of the sources said. SM Prime Holdings [PSE:SMPH] and JG Summit Group’s [PSE:JGS] Robinsons Retail Holdings [PSE:RRHI] could be the most likely candidates from the Philippines in terms of ambition and financing capability, two other sources suggested.
Casino’s Vietnam assets could intrigue and make sense for Philippine buyers as it is sizeable in itself, one of the sources said. If they instead wanted to go for the much larger Thai operations, both groups could potentially have enough cash and financing relationships to line up a bid, this source added.
Based on the latest filings, SM Prime Holdings has USD 2.66bn net debt and a TTM EBITDA of USD 828.45m, which represents a net gearing ratio of 3.21x. It reported 12 month rolling EBITDA of USD 828m for the year ended 30 September 2015. A nil-premium bid for Big C that uses up every cent it has and borrows the remaining will push SM Prime’s net gearing to 9x, according to calculations by this news service.
Robinsons Retail reported net cash of USD 86m and a 12 month rolling EBITDA of USD 138m for the year ended 30 September 2015.
Package deal played down
Sellside advisors had flirted with the idea of selling the assets together, but found that not a lot of companies were interested in both, one of the sources claimed. “Once you bundle it up, the list of buyers becomes short,” another said.
For example, Aeon is not too keen on Casino’s Vietnam operations, a source familiar with Aeon said. Aeon did take a look, but decided it can grow organically in Vietnam on its own. It would only acquire the Vietnam business at a deep discount, this source added.
A spokesperson at Aeon said he had not heard of the company’s interest in Big C.
Casino Group did not reply to emails seeking comment as of press time.