CP All Slumps Most in 4 Years on $6.6 Billion Siam Makro Bid

Billionaire Dhanin Chearavanont’s CP All Pcl plunged the most in more than four years after offering to pay $6.6 billion for Siam Makro Pcl on investor concern the price was too high.

Thailand’s 7-Eleven operator fell as much as 11 percent to 38.5 baht, poised for the biggest decline since October 2008. Siam Makro rose as much as 13 percent to a record.

Dhanin’s offer is the largest Thai deal on record as the head of the country’s biggest agricultural group bids to reassemble a retail empire after selling off control of the cash-and-carry chain he co-founded. He is offering about 53 times Siam Makro’s earnings last year, more than double the average for 20 retailer takeovers in emerging Asia announced over the last five years, data compiled by Bloomberg show.

“CP All is paying a very expensive price,” said Thananchai Jittanoon, an analyst at UOB Kay Hian Securities (Thailand) Pcl. “The two companies have different markets and business models. I find no synergy for CP at all.”

CP All, controlled by Dhanin’s Charoen Pokphand Group, offered 787 baht a share for Siam Makro, the Bangkok-based retailer said yesterday. The bid is 15 percent more than Siam Makro’s price on April 22 before the shares were suspended.

Buying Spree

Dhanin is buying companies at home and abroad, accounting for more than half of the record $31 billion in total deals announced this year in Thailand, including CP Group’s purchase of a $9.4 billion stake in China’s Ping An Insurance (Group) Co.

Siam Commercial Bank Pcl is advising CP All on the Siam Makro acquisition, and HSBC Holdings Plc is advising SHV Holdings NV, the wholesaler’s biggest shareholder.

The CP All chairman, who lists cockfighting as a hobby, has a net worth of $6.8 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.

CP All had cash and cash equivalents of 6.1 billion baht ($212 million) as of Dec. 31, according to yesterday’s statement. The company got a $6 billion bridge loan from five banks to fund the purchase, two people familiar with the matter said yesterday.

The retailer will refinance that within a year through syndicated finance, bonds and possibly equity, said the people, who asked not to be identified because the information is private.

Possible Dilution

“Uncertainty on the degree of earnings dilution from a cash call to finance the acquisition,” undermines investor appetite for CP All, Alan Richardson, a Hong Kong-based fund manager who helps oversee about $110 billion for Samsung Asset Management Co., said yesterday. His Samsung ASEAN Securities Master Investment Trust beat 98 percent of his rivals in the past year.

Siam Makro operated 57 Makro stores and five Siam Frozen stores at the end of 2012. It opened five new Makro stores last year, helping to boost annual revenue by 15 percent to 112 billion baht, the company said on Feb. 27. The Bangkok-based company’s profit rose 37 percent to 3.56 billion baht in 2012.

CP All and Tesco Plc are adding outlets in Thailand after the government raised minimum wages and introduced price guarantees for farmers. Demand for personal loans jumped 22 percent in 2012, the biggest increase in seven years, as Thai consumers took advantage of government incentives to buy new cars and homes

Chain Growth

CP All said last year it may open 7-Eleven stores in southern China and Vietnam. Earlier this month, Dhanin said he’s seeking more acquisitions in China.

“The CP leadership possibly sees strong growth prospects in Asean to warrant paying up in the first few years to extract benefits later on,” said Richardson at Samsung Asset, referring to the 10-member Association of Southeast Asian Nations. “Maybe he’s trying to create a Wal-mart model, squeeze the suppliers until they can’t breathe.”

Big C Supercenter Pcl, Thailand’s second-largest hypermarket operator, jumped 4.3 percent to 242 baht, headed for a record close, as of 10:47 a.m. in Bangkok. The shares rose 7.4 percent yesterday amid speculation investors seeking retailers in the country would prefer it to CP All.

“Some investors still wanted to stay invested in the Thai domestic consumption theme, but have soured on CP All after this deal, which was viewed as bad for CP All’s shareholders,” Athaporn Arayasantiparb, head of research at UOB Kay Hian Securities (Thailand), said yesterday.

Biggest Deal

CP All’s Siam Makro offer tops the $5.5 billion purchase of PTT Aromatics & Refining Pcl by PTT Chemical Pcl in 2011 to become the largest on record in Thailand, data compiled by Bloomberg show.

Dhanin and SHV founded Siam Makro in 1988, according to the company’s website. CP All agreed to buy SHV’s 64 percent stake for 787 baht a share and will make a tender offer to other shareholders at the same price, it said.

Charoen Pokphand was once Siam Makro’s largest shareholder with a stake of as much as 47 percent in 1997, the same year that the devaluation of Thailand’s baht triggered a financial crisis that pushed many Asian economies into recession.

After the crisis, Dhanin sold stakes in companies including Siam Makro and Lotus Supercenter, which was bought by Tesco. In May 2005, a Charoen Pokphand unit sold 7 percent of Siam Makro back to the company that controlled the retailer for 60 baht per share. The group still owns about 1 percent of Siam Makro.

(Updates with relative value from third paragraph.)
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