Thai Billionaire To Pay Dearly For Discount Retailer Siam Makro

When Dhanin Chearavanont faced financial stress after 1997, one of the assets he sold down was Siam Makro, a joint venture with Holland’s SPV Holdings.

Now Thailand’s richest businessman, who heads the CP Group, an agribusiness conglomerate, has agreed to buy back the rest of the Bangkok-listed discount retailer for a generous valuation, just four months after announcing a $9.4 billion investment in Chinese insurer Ping An. The share offer outlined Tuesday values Siam Makro, a members-only chain in Thailand, at $6.6 billion. The deal is being financed bySiam Commercial Bank (SCB) with foreign participants includingUBS , Standard Chartered and HSBC. The bridge financing required is so large in the Thai context that SCB had to seek regulatory approval to exceed a lending limit to a single company, since it already had outstanding loans to CP Group entities, the Nation newspaper reported Wednesday.

This time the actual borrower is CP All , a listed unit of CP Group that runs a highly profitable chain of 7-Eleven stores in Thailand and appears on FORBES ASIA’s most recent Fab 50 list of the region’s top public companies. CP All is paying $27.50 a share for SHV’s majority holding. It’s obliged to make an offer for outstanding shares at 787 baht apiece, which is a 15% premium to Monday’s price before shares were suspended. The stock has been on a tear since February, as it became apparent that SPV was ready to sell. Korbsak Chairasmisak, CEO of CP All, told a press conference Tuesday that he planned to expand Siam Makro into neighboring countries in Southeast Asia and possibly to China as well. Referring to the ASEAN Economic Community, a free-trade zone that takes effect in 2015, he said: ”We are entering the AEC era with a combined population of more than 600 million. We expect economic growth and civilisation to come into the region along with the AEC, which is in contrast to Europe and the US, which are facing a recession.” This is a lofty goal, but for now the fact is that CP is paying more than 50 times trailing earnings for a retailer with 57 stores in Thailand. Siam Makro reported a net profit in 2012 of THB3.56 billion ($122 million), up 37%. At $6.6 billion, it’s an expensive way to expand CP’s retailing presence. But as long as global banks are eager to lend to well-capitalised Asian corporates, the deals will probably keep coming.

source

please give me comments thanks