Bloomberg News

Thai Billionaire Bids 13 Times Sale Price to Reclaim Makro

April 23, 2013

Charoen Pokphand Group Co. Chairman Dhanin Chearavanont

Billionaire and Charoen Pokphand Group Co. Chairman Dhanin Chearavanont pauses while attending a conference hosted by the Thailand-China Chamber of Commerce in Bangkok. Photographer: Dario Pignatelli/Bloomberg

When billionaire Dhanin Chearavanont needed cash in 2005, he sold a stake in Thailand’s biggest wholesale chain for 60 baht a share. Eight years later, he’s offering 13 times that to reassemble his empire.

CP All Pcl (CPALL), controlled by Dhanin’s Charoen Pokphand Group, offered 787 baht a share for Siam Makro Pcl (MAKRO), the Bangkok-based retail group said yesterday. The bid is 15 percent more than Siam Makro’s price on April 22 before the shares were suspended.

Dhanin’s CP All, Thailand’s 7-Eleven operator, plans to add Siam Makro’s cash-and-carry wholesale chain to boost growth. The offer values Siam Makro at $6.6 billion, about 53 times last year’s earnings, more than double the average paid in 20 retailer takeovers in emerging Asia announced over the last five years, data compiled by Bloomberg show.

“CP All is paying a very expensive price,” said Thananchai Jittanoon, an analyst at UOB Kay Hian Securities (Thailand) Pcl. “The two companies have different markets and business models. I find no synergy for CP at all.”

Dhanin is buying companies at home and abroad, accounting for more than half of the record $31 billion in total deals announced this year in Thailand, including CP Group’s purchase of a $9.4 billion stake in China’s Ping An Insurance (Group) Co.

Dhanin has a net worth of $6.8 billion, according to the Bloomberg Billionaires Index. Many of his assets are owned through closely-held holding companies that he shares with his three brothers. Dhanin’s net worth calculation excludes the stakes held by his brothers, Jaran Chiaravanont, Montri Jiaravanont and Sumet Jiaravanon.

Biggest Deal

The Siam Makro purchase is the largest on record for Thai companies and the biggest announced in Asia this year. CP All had cash and cash equivalents of 6.1 billion baht ($212 million) as of Dec. 31, according to yesterday’s statement.

CP All (CPALL) fell 6 percent on April 22 after Bloomberg reported an offer would be made. The retailer’s shares will resume trading at 10 a.m. after being suspended yesterday. Siam Makro will resume trading after a two-day halt.

“Investors will react negatively to CP All stocks at the open because of uncertainty on the degree of earnings dilution from a cash call to finance the acquisition,” said Alan Richardson, a Hong Kong-based fund manager who helps oversee about $110 billion for Samsung Asset Management Co. His Samsung ASEAN Securities Master Investment Trust beat 98 percent of his rivals in the past year.

Bridge Loan

CP All got a $6 billion bridge loan from five banks to fund the purchase, two people familiar with the matter said yesterday. The retailer will refinance that within a year through syndicated finance, bonds and possibly equity, said the people, who asked not to be identified because the information is private.

Siam Commercial Bank Pcl (SCB) is advising CP All on the acquisition and HSBC Holdings Plc is advising SHV Holdings NV (SHV), Siam Makro’s biggest shareholder.

Siam Makro operated 57 Makro stores and five Siam Frozen stores at the end of 2012. It opened five new Makro stores last year, helping to boost annual revenue by 15 percent to 112 billion baht, the company said on Feb. 27. The Bangkok-based company’s profit rose 37 percent to 3.56 billion baht in 2012.

CP All (CPALL) and Tesco Plc (TSCO) are adding outlets in Thailand after the government raised minimum wages and introduced price guarantees for farmers. Demand for personal loans jumped 22 percent in 2012, the biggest increase in seven years, as Thai consumers took advantage of government incentives to buy new cars and homes.

‘Growth Prospects’

CP All said last year it may open 7-Eleven stores in southern China and Vietnam. Earlier this month, Dhanin said he’s seeking more acquisitions in China.

“The CP leadership possibly sees strong growth prospects in Asean to warrant paying up in the first few years to extract benefits later on,” said Richardson at Samsung Asset, referring to the 10-member Association of Southeast Asian Nations. “Maybe he’s trying to create a Walmart model, squeeze the suppliers until they can’t breathe.”

Big C Supercenter Pcl (BIGC), Thailand’s second-largest hypermarket operator, rose to a record yesterday amid speculation investors seeking retailers in the country would prefer it to CP All. The shares jumped 7.4 percent to 232 baht at the close of trading in Bangkok, the highest since listing in the city in 1992.

Thai Consumption

“Some investors still wanted to stay invested in the Thai domestic consumption theme, but have soured on CP All after this deal, which was viewed as bad for CP All’s shareholders,” Athaporn Arayasantiparb, head of research at UOB Kay Hian Securities (Thailand), said yesterday.

CP All’s acquisition of Siam Makro tops the $5.5 billion purchase of PTT Aromatics & Refining Pcl by PTT Chemical Pcl in 2011 to become the largest on record in Thailand, data compiled by Bloomberg show.

Dhanin and SHV founded Siam Makro in 1988, according to the company’s website. CP All agreed to buy SHV’s 64 percent stake for 787 baht a share and will make a tender offer to other shareholders at the same price, it said.

Charoen Pokphand was once Siam Makro’s largest shareholder with a stake of as much as 47 percent in 1997, the same year that the devaluation of Thailand’s baht triggered a financial crisis that pushed many Asian economies into recession.

After the crisis, Dhanin sold stakes in companies including Siam Makro and Lotus Supercenter, which was bought by Tesco. In May 2005, a Charoen Pokphand unit sold 7 percent of Siam Makro back to the company that controlled the retailer for 60 baht per share. The group still owns about 1 percent of Siam Makro.

Dhanin’s closely held investments, which include companies in China and other countries, are valued at a combined $3.6 billion, according to a breakdown of his assets provided by Viranon Futrakul, a spokesman for Charoen Pokphand Group.

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Tony Jordan at tjordan3@bloomberg.net


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