Charoen Pokphand Group and Woolworths Ltd. are considering dropping their bids for billionaire Li Ka-shing’s Hong Kong supermarket chain, said two people with knowledge of the matter.
CP Group, controlled by Thai billionaire Dhanin Chearavanont, and Woolworths are balking at Li-controlled Hutchison Whampoa Ltd.’s asking price for ParknShop, said the people, who asked not to be identified because the deliberations are private. Hutchison may decide in the coming week whether to keep ParknShop or sell it, said two people familiar with the matter.
Hutchison is seeking $3 billion to $4 billion for ParknShop, one of Hong Kong’s two main supermarket chains, a person with knowledge of the matter said in August. CP Group is also concerned it doesn’t have the capacity to manage ParknShop after an acquisition, said one of the people.
“There are so many people who want to buy, but they are dropping out because it’s expensive and you can see the problem is with the seller,” said Titus Wu, an analyst with DBS Vickers Hong Kong Ltd. “If they want to sell, they should cut the price.”
Any buyer faces a slowing grocery market and surging rents in Hong Kong, where property agent Savills Plc. estimates shop leases have doubled over the past four years. Sales growth in Hong Kong’s supermarket industry slowed to 7.7 percent in June from last year’s annual increase of 11 percent, government statistics show.
ParknShop attracted initial offers in August from suitors including China Resources Enterprise Ltd., Sun Art Retail Group Ltd., Japan’s Aeon Co., Woolworths and CP Group, according to people with knowledge of the process.
Suthana Hongthong, a CP Group spokeswoman in Bangkok, declined to comment, as did Hutchison Whampoa spokesman Jeremy Lau. Woolworths spokeswoman Claire Kimball didn’t immediately respond to calls outside of regular business hours.
Woolworths, Australia’s largest retailer, is seeking ways to recapture rapid growth which caused net income to rise by more than 10 percent annually for 11 consecutive years before slowing to a 5.1 percent rate in 2011, according to data compiled by Bloomberg.
Dhanin is buying at home and abroad with deals including CP Group’s purchase of a $9.4 billion stake in China’s Ping An Insurance (Group) Co. CP All Pcl, a Bangkok-based 7-Eleven operator controlled by the billionaire, recently completed a deal for the purchase of discount wholesaler Siam Makro Pcl.
ParknShop, which sells everything from eggs to whiskey, had 33 percent of the Hong Kong grocery market in 2012, trailing Wellcome, controlled by Singapore-listed Dairy Farm International Holdings Ltd., with 40 percent, according to researcher Euromonitor. CR Vanguard Supermarket, run by state-backed mainland conglomerate China Resources, ranked third with 7.8 percent.
ParknShop had revenue of HK$21.7 billion ($2.8 billion) last year, and has more than 270 of its 345 outlets in Hong Kong. ParknShop’s 60 outlets in mainland China have struggled due to competition from rivals such as Sun Art Retail Group Ltd. Its mainland operations reported declines in revenue and operating earnings in 2012, according to Hutchison’s annual report.
The chain’s first store opened in 1973 in Hong Kong’s Stanley beach area, one of the few neighborhoods in the congested city where shoppers can actually park near stores.
Dhanin has a net worth of $6.5 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. Li has a net worth of $29.2 billion.