Big C, an affiliate of Groupe Casino (also known as Casino Guichard-Perrachon), will buy Carrefour’s businesses in Thailand for Bt35.5 billion ($1.18 billion).
Carrefour’s Thai business, which comprises 34 hypermarkets, eight supermarkets and 37 shopping centres, generated sales of Bt30 billion in 2010. The valuation achieved translates into 13 times Ebitda of the business being sold, Carrefour said in a written statement released yesterday.
The deal has been struck at a 2010 enterprise value-to-Ebitda multiple of 8.6, after accounting for some synergies, Big C reported. Some analysts commented that Big C, which was advised by Deutsche Bank, the Royal Bank of Scotland and Rothschild, has paid a full price for the business.
“The synergies in the deal are very compelling so Casino has chosen to report numbers after accounting for synergies,” said a source close to the deal. “Big C was able to offer this price largely on account of the compelling strategic fit.”
The deal will generate synergies of around 1.2% of combined 2010 estimated sales, Casino said while announcing the deal. These include improved purchasing terms, rationalised distribution and higher efficiency in the greater Bangkok area, where Big C’s presence will more than double, Casino Group chief financial officer Antoine Giscard d’Estaing said in a conference call late yesterday. The deal is expected to be accretive to Big C’s earnings next year, while all synergies are expected to be implemented by 2013.
Big C will now operate a total of 103 hypermarkets in Thailand and post a combined 2010 estimated turnover in excess of Bt100 billion, making it a leader in the hypermarket segment. Carrefour’s 37 shopping centres in Thailand contribute around half of the Ebitda it earns in the country. Big C will now have more than 100 shopping centres and 585,000 square metres of gross leasable area.
In addition to Big C, two local players were competing for the asset, said a source, who described the gap between Big C’s winning bid and the other two as "narrow".
The acquisition will be financed out of Big C’s existing cash balance and through debt. Big C is taking on a small portion of debt currently on the books of Carrefour Thailand, which serves largely as working capital. A consortium comprising Deutsche Bank, RBS (both of which are also acting as M&A advisers) and HSBC are providing Big C with a bridge loan of around $1 billion, said a source close to the deal.
“Carrefour’s decision to sell its operations in Thailand is part of its strategy to focus its resources on markets where it holds a leadership position and [to] optimise its capital employed,” said Carrefour in its statement. “Carrefour’s growth prospects in Thailand did not allow the group to envisage occupying a leading position in this market in the short- or medium-term.”
Carrefour is also running an auction for the rest of its Southeast Asia business, which comprises 19 stores in Malaysia and two in Singapore. Tesco, Singapore’s Dairy Farm, Japan’s Aeon and others are expected to bid for the Southeast Asian business. Carrefour is being advised on its Asian disposals by Goldman Sachs and UBS.
The Thailand sale, which is still subject to regulatory approval, is expected to be completed by early 2011. Casino has been operating in Thailand since 1999 and has a strong local identity, including a listing on the Stock Exchange of Thailand. However, even after the acquisition, Big C will be the number two player in the Thai market after Tesco, so regulatory approvals are expected to be forthcoming.