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NEWS UPDATES 4 October 2010

Carrefour's operations bidding

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A bidding war is heating up for Carrefour's supermarkets in Thailand, Malaysia and Singapore as the French retail giant plans to exit the countries after failing to take a dominant position in the region.

Carrefour, the world's second-biggest retailer behind US giant Wal-Mart, is looking to unload its 43 Thai, 23 Malaysian and two Singaporean hypermarkets in a sale some estimates suggest could net $1 billion.

Analysts believe Carrefour's eagerness to sell reflects the fact that, despite its large foothold and the robust health of the markets, the firm has trailed competitors such as Britain's Tesco in terms of market share.

"Carrefour is the second-biggest retailer in the world. Perhaps being in last place in Thailand is a reason they want to sell their business here," said Jit Siratranont, deputy secretary general of the Thai Chamber of Commerce.

Carrefour refuses to comment on the matter, but it acknowledges that it is ready to consider offers in the countries where it is not a market leader and has little prospect of becoming one.

It is therefore likely to cede its network in these three major markets, which enjoy steady growth and can rely on a combined population of over 100 million people.

Potential buyers are circling, with a second round of bidding expected by November.

With a supply chain in place, the task for buyers would be to improve margins, he said.

According to Wright, the supermarket sector in Asia was worth $389 billion in 2009 and is expected to grow by 3.3 percent a year between now and 2014, compared with around 2.1 percent growth forecast globally.

In Thailand, a raft of international players has been linked to the bidding in recent weeks, including retailers Tesco, Japan's Aeon and France's Casino.

Thai companies have also been tipped as potential buyers, including retailer Central Group, consumer goods and manufacturing firm Berli Jucker and majority state-owned energy giant PTT.

PTT, however, recently indicated it was not interested, while the Wall Street Journal has reported that Aeon - which snapped up Carrefour's Japanese assets in 2005- and Tesco were eliminated from contention for bidding too low.

According to Kim Eng Securities strategist Mayuree Chowvikran, Berli Jucker and Casino are likely to be the key bidders in Thailand.

Meanwhile, though Singapore may be a smaller market, its affluent population, including a large expatriate community, is expected to entice bidders.

Malaysia also appears to be drawing interest, with Deputy Trade Minister Mukhriz Mahathir telling AFP in August that "other hypermarkets are keen to take over" Carrefour's business in the country. "There are many suitors," he said.

Carrefour, paradoxically, recently announced the opening of two new stores Malaysia's Selangor state.

Manokaran Mottain, a senior economist at AmResearch, said he believed Malaysia offered some interesting opportunities as "the retail market is doing well with domestic spending looking good."

The motivation behind Carrefour's desire to retreat from the market could either be because they are over-stretched, or that they are on the look-out for yet more lucrative markets. India may be the firm's next target.

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