CP All deal raises fear of market dominance
Makro will be used to offer opportunities to SMEs, farmers, CEO tells press
The Commerce Ministry will closely monitor Makro and 7-Eleven after the announcement of a tie-up, which would create a giant with the largest revenue in the retail sector.
Vatchari Vimooktayon, permanent secretary of the ministry, said the joining up of Siam Makro and CP All – operators of Makro cash-and-carry outlets and 7-Eleven convenience stores – means their combined revenue would be as high as 48.5 per cent of Thailand’s trade industry.
“With such a big market share, the ministry will definitely need to closely monitor their practices,” she said yesterday. “This is to ensure that consumers and other competitors do not suffer from having to pay more for products due to a few number of players in the retail industry.”
The ministry says 7-Eleven is now the biggest retailer in terms of revenue. Last year, its revenue reached Bt159 billion, followed by Tesco Lotus’s Bt148 billion, Big C Supercentre’s Bt121 billion and Makro’s Bt98.62 billion. Of the four, Tesco Lotus is the only retailer that is not listed on the stock exchange.
Under the Bt189-billion deal to take over Siam Makro, CP All will see its annual revenue expand to Bt258 billion.
At a press conference to announce the deal – historic in the local retail industry, Korsak Chairasmisak, chief executive officer of CP All, brushed aside fears of market dominance.
“Makro is a modern cash-and-carry retail format while we operate through a convenience store format,” he said with a straight face. “Market dominance should not be implicated in the deal.”
Makro would mainly be used as a new distribution channel to export products from small and medium enterprises (SMEs) as well as agricultural goods, such as fresh and frozen produce, to Asean countries, Korsak said. This would offer new opportunities for SME operators and farmers.
Additional benefits of the acquisition would be to strengthen the operation of CP All and its subsidiaries, as well as synergise activities in seeking new products and services catering to customer demand, as well as enhancing efficiency and economy of scale.
CP All is a subsidiary of unlisted Charoen Pokphand Group, which is chaired by Dhanin Chearavanont. Earlier this year, CP Group entered the Chinese insurance market through the US$9.4-billion (Bt270.8-billion) acquisition of a 15-per-cent stake in Ping An Insurance.
CP All’s proposed acquisition of Siam Makro worth $6.6 billion is the largest transaction announced globally in the retail sector so far this year and the largest ever in the Asia-Pacific region, according to Thomson Reuters.
The retail sector in Thailand is worth approximately Bt1.4 trillion. Modern trade which cover hypermarkets, supermarkets, convenience stores, department stores, category “killers” and speciality stores generate 40 per cent of that, according to Thai Retailers Association. Modern trade has registered huge growth in the past years amid fierce competition.
Big C rose to the No 3 level through its acquisition of Carrefour in Thailand in 2010, while CP All plans to increase the number of 7-Eleven outlets from nearly 7,000 to 10,000 by 2018.
According to Thomson Reuters, the CP All-Siam Makro deal brings the value of this year’s announced retail mergers and acquisitions worldwide to $25.6 billion, up 87 per cent from the same period last year, and the strongest year-to-date level in terms of value since 2007 ($61.2 billion).
Domestic mergers and acquisitions in the Asia-Pacific has reached $73.4 billion so far this year, an 8.8-per-cent increase from the comparative period last year, with the retail sector accounting for 12.5 per cent of target activity, up 490 per cent from 2012 year to date. The value of mergers and acquisitions involving Thai companies amounted to $7.2 billion, a 110-per-cent increase from the same period last year.
