Siam Makro price jumps on CP All's speculated takeover

The request was made after the Siam Makro share price surged dramatically last week. 

The company expected to provide material information that might effect the share price and/or the decisions of shareholders and general investors. 

Founded in May 1988, Siam Makro was a joint venture between Charoen Pokphand and Dutch trading company SHV Holdings. Siam Makros’s shares were listed on the SET in August 1994 with a total registered capital of 240 million shares with par value of Bt10, each fully paid-up. 

The principal business of Siam Makro is the operation of membership-based cash-and-carry trade centres, registered under the name Makro, throughout Thailand. CP Group, however, sold most of its stake in Siam Makro to SHV in 1997.

Now, according to Bloomberg, CP All, the world’s third-biggest operator of 7-Eleven convenience stores, is preparing a takeover offer for Siam Makro, which has market value of Bt163.7 billion (US$5.7 billion). 

Bloomberg reported that the takeover deal might be announced as soon as this week. 

 

Andrew Yates, head of international equity sales for Asia Plus Securities in Bangkok, told Bloomberg: “It is still a good deal all around as the Dutch [SHV] cannot or would not grow it, so it makes sense to sell. CP can grow it and they would rather not see a competitor buy it, so price is largely irrelevant for them. It shows the power of the Thai domestic economy.” 

Meanwhile, a source from the local retail industry told The Nation that he had yet to see any real benefit for CP All from acquiring Siam Makro.

“CP All cannot have good synergy between its 7-Eleven convenience-store business and the Siam Makro cash-and-carry wholesaler as both operate different types of business. 

Siam Makro itself has no branch in foreign markets, so there is no overseas expansion benefit at all for the Thai retailer. 

CP Group itself has successfully expanded its local retail network for the distribution of its processed foods to individual consumers,” he said. 

Chakrit Puechpan, the head of domestic equities at MFC Asset Management, told Bloomberg that there was a concern that CP All might acquire Siam Makro at a very high price. 

CP All “may have to raise a large amount of funds from new borrowings or share sales to fund the purchase. Even with the current market price, Siam Makro is already trading at very high valuations.” 

According to Reuters, shares in CP All fell nearly 6 per cent  to close at Bt43.50 yesterday on concerns about possible fund-raising related to market rumours of its acquisition of Siam Makro. 

Dealers said CP All might need to issue new shares to raise funds to finance the purchase if the deal goes ahead.

Siam Makro announced earlier that it had set aside an investment budget of Bt1.5 billion to open three new branches in Mukdahan, Satun and Trat provinces this year, according to chief executive officer Suchada Ittijarukul. Currently, the company has 57 branches nationwide – 11 in Bangkok and 46 in the provinces. 

Meanwhile, the company plans to increase its warehouses from two branches in Wang Noi, Ayutthaya, and Nakhon Ratchasima to three branches this year. 

The company targets revenue growth of 5.5-6.5 per cent, higher than the country’s estimated growth in gross domestic product of 4.5 per cent. 

Siam Makro recorded total sales last year of more than Bt100 billion. 

Meanwhile, CP All plans to open up to 550 new branches and warehouses in Thailand at the cost of between Bt6 billion and Bt6.5 billion this year to help defend its 75-per-cent market share. CP All aims to have 10,000 7-Eleven stores in Thailand by 2018.

The company also plans to apply for a licence for one of 10 zones in China, aiming to focus initially on the area around Shanghai.