Saigon Co.op’s failure to buy Big C made Thai players stronger in country’s retail

Last week, French retailer Casino sold its Big C Vietnam business to Thai conglomerate Central Group for 1 billion euros ($1.1 billion) including debt.

This is Central’s most significant overseas acquisition since it bought Italian department store chain La Rinascente SpA in 2011. It will have access to Big C’s 43 stores in Vietnam and 30 malls that generated turnover of 586 million euros ($672 million) in 2015. Central, which has operations in sectors like fashion and hospitality, has a partner in the deal — Nguyen Kim Group, the owner of Vietnam’s biggest electronics store chain, in which it owns a 49 per cent stake.

Lost opportunity for Vietnam’s retail leader

But the deal also marked a big failure — for Saigon Co.op, Vietnam’s largest retailer, which really wanted Big C’s assets.
Had Saigon Co.op managed to buy Big C Vietnam, it would have made its leadership position even stronger by adding Big C’s network of hypermarkets and convenience stores to its own 82 outlets. And that in turn would have helped it achieve its ambitious target of having sales of VND27 trillion ($1.2 billion) by the end of 2016.
But that was not to be. And the reason was not fulfilling a crucial bureaucratic requirement. Ho Chi Minh City-based Saigon Co.op did not have an overseas investment license. Local firms need that document before they can bid to buy assets from a foreign seller, which in this case was Casino.
In fact, Saigon Co.op’s management had met with Vietnam’s Prime Minister to find a way around the license issue on April 29. Within a few hours of the meeting, Central announced its deal to acquire Big C Vietnam. A Saigon executive confirmed that they were not successful because of issues with meeting investment procedures, and that Saigon Co.op and “a Thai retailer” were the last two companies in the final bidding round.
In other words, Saigon Co.op ran out of time in getting that license and Central swooped in to close the deal.
Casino was seeking to sell its businesses in Vietnam and Thailand, in addition to real estate assets to reduct its huge debt pile — €6.1 billion — that has pushed its credit rating to junk.
Other bidders in the race for Big C included AEON (Japan), Lotte (South Korea), TCC Holding (Thailand), and Dairy Farm (Singapore).

Stronger Thai presence

Thai players such as Central and its rival TCC Holding have been keen to expand to other markets to hedge against ongoing political uncertainty in Thailand, and to tap markets with young demographics that are growing faster, such as Vietnam.
With the latest Big C deal, Central Group owns one of the most popular supermarket operators in the neighbouring country, where it already owns 4 shopping centres and 13 smaller size supermarkets named Lanchi Mart, which is present in rural areas of Vietnam.
Big C Vietnam contributed just 2 per cent to Casino’s total sales, but its revenue growth soared 26 per cent in the first half of 2015, higher than the growth rate of the rest of its Asia business. Central bought it when the chain seems to have hit a higher momentum.
TCC Holding marked its expansion in the $110 billion Vietnam retail market last year by the acquisition of German group METRO’s wholesale business for €655 million.
Total retail sales in Vietnam rose 10.6 per cent year-on-year to reach $110 billion last year, according to the Vietnam General Statistics Office (GSO). By the end of last year, Vietnam saw the total number of retail outlets grow to 724 supermarkets and 132 shopping malls. The market is expected to grow to 1,300 supermarkets, 300 malls and thousands of convenience stores by 2020.
Saigon Co.op and Vingroup expanded aggressively in 2015, according to the GSO. However, the forays of foreign companies were more notable, it said. “Regional retailers consider Vietnam as a key market when the ASEAN Economic Community and the Trans-Pacific Partnership are formed. They are building their footprints with an aim to become market leaders.”
France’s AuchanSuper, Korea’s E-mart and Lotte, Malaysia’s Parkson, AEON and Central Group are pushing their investment budgets for Vietnam, the GSO said.

Source: Deal Street Asia