10 Companies Eyeing Li Ka-shing's Hong Kong Supermarket ParknShop

on August 22 2013 5:45 AM
RTX11Y5A
A shopper walks into one of the biggest Parknshop Superstores, owned by tycoon Li Ka-shing, inside a shopping mall in Hong Kong July 25, 2013. Japan's Aeon Co Ltd and state-owned China Resources Enterprise Ltd are among the suitors considering bids for the Hong Kong supermarket business being sold by billionaire Li. REUTERS/Bobby Yip

ParknShop, the Hong Kong supermarket chain owned by Li Ka-shing, Asia’s richest man, is up for grabs, and as many as 10 possible suitors have emerged.

So far, bids for the Hutchison Whampoa Ltd.-owned (HKG:0013) grocery store range from $3 billion to $4 billion. Many of the possible buyers are already competitors, like Britain’s Tesco (LON:TSCO) and Hong Kong's China Resources Enterprise, Ltd. (HKG:0291).

Meanwhile, Wal-Mart Stores Inc. (NYSE:WMT), the world’s largest retailer, is reportedly considering making an offer.

Here are the 10 companies that have or may bid to buy 40 percent of Hong Kong’s grocery market by buying ParknShop.

1.       KKR & Co. L.P. (NYSE:KKR)

New York-based private equity giant KKR released a 24-page report in April declaring its confidence in China and in its slow transition toward a consumption-driven economy. If the company, run by Henry Kravis and George Roberts, forked over the $3 billion to $4 billion Hutchison wants for the supermarket chain, it would be KKR’s biggest Asia deal yet, surpassing the $1.8 billion purchase of South Korea’s Oriental Brewery Co. in 2009, according to data compiled by Bloomberg.

2.       TPG Capital, L.P.

Another privately held private-equity behemoth, the Fort Worth, Texas-based TPG, has also made a bid for ParknShop. “This is a deal for private equity because it’s an asset that can generate very steady cash flows,” Cusson Leung, a Hong Kong-based analyst at Credit Suisse AG, told Bloomberg. “Even though the growth is slower, ParknShop operates in a very stable market.”

3.       China Resources Enterprise, Ltd. (HKG:0291)

Already a major competitor to ParknShop on the mainland, state-owned China Resources could dominate Hong Kong’s food wholesale market. AC Nielsen, a market research firm, estimates the chain has nearly 40 percent of Hong Kong’s market share. Add the 7 percent China Resources’ Vanguard brand owns and it take the closest rival, Wellcome, with only 33 percent of the market, down a peg.

4.       Sun Art Retail Group Ltd. (HKG:6808)

The investment holding company operates a chain of hypermarkets throughout mainland China, under the banners of RT-Mart and Auchan, a joint French venture.

5.       Woolsworths Ltd. (ASX:WOW)

Woolsworths, the largest retail company by market capitalization in Australia and New Zealand, could be the first company from Down Under to make a dent in the grocery markets in Hong Kong and China as a whole. The company opened its first office in Hong Kong in 2006.

6.       Wesfarmers Ltd. (ASX:WES)

Yet, another Australian contender has emerged: Wesfarmers Ltd., based in Perth. Of foreign companies, China and Hong Kong’s main grocery retailers are either domestic, Japanese, American, British, South Korean or French.

7.       Tesco (LON:TSCO)

Britain’s retail giant already operates everything from hypermarkets to convenience stores in Hong Kong, but ParknShop represents more than just a grocery store. The company signed a memorandum of understanding with China Resources earlier this month in hopes of merging their hypermarket businesses on the mainland. With such cooperation already in place, Tesco and China Resources could join forces to acquire ParknShop, giving both companies major leverage in the market, the South China Morning Post reported on Wednesday.

8.       Lotte Shopping Company Limited (KRX:023530)

South Korea’s retail goliath already owns a shopping complex, a handbag wholesaler, an insurance company, a wire and cable specialist, and a textile dye firm in Hong Kong. Adding a grocery store would offer a steady flow of cash and give it a stronger grasp on business on the mainland.

9.       Aeon Co., Ltd. (TYO:8267)

Japan’s supermarket and retail chain is considered the front-runner in the race to buy ParknShop, according to Inside Retail Asia. The company already owns a variety of wholesale and business service providers in Hong Kong and is listed on the Hong Kong Stock Exchange, under Aeon Stores Co., Ltd. (HKG:0984).

10.   Wal-Mart Stores Inc. (NYSE:WMT)

The world’s largest retailer was reportedly weighing a bid for ParknShop earlier this month, and International Business Times argued on Wednesday that acquiring the company could position Wal-Mart to dominate the market in China.

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