
SEA retail is harder than it seems
When it comes to retail in Southeast Asia, private equity seems to face an uphill battle.
Within the same week that French hypermarket operator Carrefour stalled the sale of its Malaysian and Singaporean assets – targets that Navis Capital Partners had been pursuing since the auction’s onset in July – Indonesia’s Matahari shortlisted at least three industry bidders in the auction of its Hypermart chain, omitting the Carlyle Group, which was previously said to be in the running.
Both Carrefour and Matahari’s assets were estimated to sell for upwards of $1 billion each, among the largest targets in Southeast Asia this year. Carrefour, which had placed its Malaysian and Singaporean stores on the auction block with its Thai assets, sold the latter to French retailer Groupe Casino for $1.2 billion. That price bought Casino 42 stores across Thailand, while the sales process for Carrefour’s 19 stores in Malaysia and two in Singapore were shelved. Meanwhile, the Matahari sale of 82 Hypermarts in Indonesia has seen interest from Wal-Mart, Korea’s Lotte Shopping and Casino, all of which were fast-tracked to the second round of bidding. Earlier reports had suggested that Carlyle was a contender, but an investor close to the process told AVCJ that the firm was not part of the auction as of last week.
According to one investor with knowledge of the deals, in order for a PE firm to win such an auction, they must have the backing and the conviction to grow the businesses into the leading players in their markets, which is a tall order for the buyer.
“That’s probably why no PE firm has stayed in the running for the reasonable distance,” the investor told AVCJ, adding that holding companies of this scale had difficulty entertaining bids from suitors who could not promise to significantly leverage the brands. In Thailand, Carrefour claims to be the fifth-largest food-mart player in the country, which means that taking the brand to the top is a different proposition than making the same promise in Malaysia and Singapore, where Carrefour has far fewer stores.
In Indonesia, meanwhile, Matahari is the second-largest hypermart player. For global retailers, acquiring such a prized asset would automatically provide a substantial footprint in one of the world’s most lucrative countries – in terms of population and potential for growth – and one that has traditionally been trickier to navigate for overseas franchises. The stakes would certainly prompt the globe’s largest retail names to pay a steep premium for the assets, which creates staunch competition for private equity suitors.
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