Tesco Thailand bid spurned
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As speculation mounts over the future of its Asia business units, a bid for Tesco Thailand has reportedly been rebuffed.
As reported in November, Thai billionaire Dhanin Chearavanont prepared a speculative bid by his company Charoen Pokphand Group (CP) to buy back the troubled Tesco Plc’s Thailand business division, which he sold during the Asia financial crisis.
Reuters now reports Chearavanont held “preliminary talks” with Tesco after securing the support of the Bank of America in November, but Tesco spurned his approach. He has now secured support from UBS and Siam Commercial Bank (SCB) for another bid for the business, which could be worth about US$10 billion.
A sale of the Thai operation – and/or its Korean, Malaysian or Indian businesses – would greatly benefit Tesco’s balance sheet, and its credit rating now classified essentially as junk status by ratings agencies.
Citing “people familiar with the matter” Reuters reported Tesco and the Thai tycoon are not currently engaged in any talks, however he is ready to proceed with a formal offer if Tesco decides to sell the Thailand operations.
“While it is not known why Tesco turned down Dhanin’s approach, his sustained interest in the asset could be positive for Britain’s biggest retailer, which is battling sluggish growth at home and has been hit by ratings downgrades and an accounting scandal,” said Reuters.
Chearavanont, 76, bought back Siam Makro in 2013 for $6.6 billion and reacquiring Tesco would give him control of a substantial part of Thailand’s retail market.
The future of Tesco’s offshore businesses has been under increased speculation since new CEO Dave Lewis took the helm of the company, under siege from regulatory probes into profit exaggerations and substantial loss of market share in its core UK home market.
Lewis enigmatically said in January Tesco was “committed to keeping all of the operations we have overseas, until we make any decisions otherwise”.
Tesco Thailand acquired a controlling interest in Chearavanont’s Lotus supermarket business in 1998 for £206 million, rebranding it Tesco Lotus. The chain has now grown to 1700 shops – from hypermarkets to convenience stores. Investment banker Morgan Stanley estimates Tesco Thailand to be worth between US$7.2 billion and $9.9 billion.
Questions & Answers
Q.Why did Dhanin Chearavanont initially sell the Thailand business that he is now trying to reacquire?
Why did Dhanin Chearavanont initially sell the Thailand business that he is now trying to reacquire?
He sold the Tesco Plc’s Thailand business division during the Asia financial crisis. He is now preparing another bid to buy it back from Tesco, having previously sold it in 1998.
Q.What is the primary reason Tesco might consider selling its overseas operations, such as the Thailand business?
What is the primary reason Tesco might consider selling its overseas operations, such as the Thailand business?
A sale of the Thai operation, and/or its other Asian businesses, would greatly benefit Tesco’s balance sheet. This is important as its credit rating is currently classified as junk status by ratings agencies.
Q.How large is the Tesco Lotus chain in Thailand that Dhanin Chearavanont is attempting to buy?
How large is the Tesco Lotus chain in Thailand that Dhanin Chearavanont is attempting to buy?
The Tesco Lotus chain has grown significantly and now comprises 1,700 shops. These range from large hypermarkets down to smaller convenience stores across Thailand.
Q.What financial institutions are supporting Dhanin Chearavanont in his latest attempt to bid for Tesco Thailand?
What financial institutions are supporting Dhanin Chearavanont in his latest attempt to bid for Tesco Thailand?
Dhanin Chearavanont has secured support from UBS and Siam Commercial Bank (SCB) for his current bid. He had previously secured support from Bank of America for an earlier approach.