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NEWS UPDATES 6 September 2010

Carrefour sales attracts U.S. interest

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The move by French hypermarket chain, Carrefour, to sell its stores in Malaysia, Singapore and Thailand has generated interests in the US.

US institutions involved in the merger and acquisition activities are closely monitoring the developments.

Also, all the major US dailies, including some local provincial newspapers, have been carrying reports about it.

Carrefour is keen to move to India where it sees a huge middle-class consumer base with big purchasing power and appetite for foreign consumer goods.

The analyst said major US stores, which were interested to enter India, were trying to "learn" from the experiences of Carrefour’s bid to penetrate the Indian market.

"This is one way to avoid the pitfalls," he said.

India, which is by no means an easy turf for foreign retailers, is still considered to be a "semi-closed market".

Foreign retailers have devised a way to circumvent the restrictive regulations that do not allow retailing by foreign companies. They have to set up wholesale operations to comply with the maze of Indian regulations.

Doing business in Malaysia, Singapore and Thailand, however, is much easier.

The flip side is that they have to contend with a much-smaller consumer base and less consumer purchasing power.

But it is not just in the US where interest in the Carrefour sale is peaking.

Other Western countries and Japan are also showing keen interest.

The offers for Carrefour’s 69 outlets in Malaysia, Singapore and Thailand were supposed to have been received last Wednesday.

Among those bidding were reportedly Japanese rival Aeon, Britain’s Tesco and France’s Casino Gulchard-Perrachon SA.

Most US-based analysts are struck by what they see as a "daring attempt" by Aeon.

Japanese stores are, generally, considered to be risk-averse, particularly when it comes to venturing into foreign markets.

They are content with the domestic Japanese market where they feel comfortable in the local business culture and understand the behavioural patterns of Japanese consumers.

Also, Aeon’s bid has not surprised US analysts who said that the Japanese concern has once before in 2005, acquired the assets of the French in Japan.

Also in the race are Singaporean concerns -- NTUC FairPrice and the Dairy Farm International Ltd.

NTUC is interested, basically, in Carrefour’s stores in Singapore even though there was little chance of these stores being sold in isolation, according to US sources.

However, analysts said a "package deal”, that would include the sale of Malaysian assets, could be a possibility.

Tesco is considered a "dark horse" who would make it to the winning line.

Its offer is also seen as a "natural urge" for its expansion in South-East Asia where it has been strengthening its existing presence in both Malaysia and Thailand.

Tesco has not confirmed its plans in South-East Asia nor has it denied its ambitions for expansion in the region.

According to sources, Carrefour, which was targeting a price of US$1 billion for its asset sale, was changing its strategic thrust from South-East Asian countries to India.

There is, obviously, also a lesson in this for many South-East Asian retailers who can sense the direction in which the business winds are blowing -– namely in the direction of India

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