Li Ka-Shing’s Hutchison May Sell ParknShop supermarket chain for $2 Billion because the industry is mature and growing slowly; ParkNShop and Dairy Farm had a combined 73 percent market share in HK

Hutchison May Sell ParknShop for $2 Billion, WSJ Reports

Hutchison Whampoa Ltd. (13), controlled by Hong Kong’s richest man Li Ka-shing, is looking to sell its ParknShop supermarket chain for between $1 billion and $2 billion, the Wall Street Journal said yesterday. The company, which operates businesses from global ports to telecommunications, has hired Goldman Sachs Group Inc. and Bank of America Merrill Lynch to handle the sale, the WSJ said, citing unidentified people.Li plans to exit Hong Kong’s grocery-store market because the industry is mature and growing slowly, the newspaper reported. Li, who turns 85 this month, is called “Superman” by Hong Kong’s media for his investing prowess. His net worth is $27 billion, making him the 17th richest individual in the world, according to data compiled by Bloomberg.

Hans Leung, a Hutchison spokesman, didn’t answer two calls to his mobile phone made by Bloomberg News after normal business hours yesterday evening.

Hutchison made the decision to sell the chain last month and will complete its internal review process by mid-August, the Journal reported. Potential bidders will receive details “soon,” the paper said.

ParknShop and Dairy Farm International Holdings Ltd. (DFI)’s Wellcome chain are the two largest supermarket operators in Hong Kong. The two operators had a combined 73 percent market share last year, the WSJ said, citing Euromonitor.

To contact the reporters on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net; Joshua Fellman in New York at jfellman@bloomberg.net

Updated July 19, 2013, 6:31 p.m. ET

Hutchison Whampoa to Shop Its Hong Kong Grocery Chain

PRUDENCE HO and YVONNE LEE

HONG KONG—Hong Kong’s richest man is planning to sell his company’s flagship ParknShop supermarket chain, one of two that dominate the city’s grocery business, in a deal that could fetch between US$1 billion and US$2 billion, people familiar with the matter said Friday.

Hutchison Whampoa Ltd.,0013.HK +1.08% which is controlled by Li Ka-shing, has hired Goldman Sachs Group Inc. GS +0.18% and Bank of America Merrill Lynch to handle the sale of ParknShop, the people said, adding that details of the company and sale will be sent to potential bidders soon.

Hutchison Whampoa decided to sell ParknShop last month and the supermarket chain is expected to complete its internal due-diligence process by the middle of August, a person familiar with the matter said.

Hutchison Whampoa, Goldman Sachs and Bank of America Merrill Lynch couldn’t be reached for comment.

The move by Mr. Li comes at a time when his global ports-to-telecommunications conglomerate is facing its most challenging environment in recent years, with growth slowing in most markets and some major economies in retreat. It is common for Mr. Li to sell assets to keep profits growing. In 2011, Hutchison Whampoa booked a gain of HK$44.30 billion (US$5.7 billion) from the listing of its ports assets in Singapore.

A ParknShop sale would provide strong cash flow for Hutchison to further expand its overseas operations. The company has gone on a shopping spree in Europe since the start of the global financial crisis, spending billions of dollars on infrastructure and telecom assets, taking advantage of attractive prices and a weak euro.

In June, Hutchison Whampoa said it would buy Telefónica

SA’s TEF.MC +0.27% O2 Ireland unit for €850 million (US$1.1 billion). A consortium of Mr. Li’s companies earlier announced the purchase of a waste-management business in the Netherlands.

Mr. Li plans to exit Hong Kong’s grocery-store market, which is an effective duopoly, in part because it is mature and growing slowly. The two largest supermarket chains in Hong Kong—ParknShop and Wellcome, which is owned by Dairy Farm International Holdings Ltd DFIHY +0.46% —accounted for a combined of 73% market share last year, according to Euromonitor.

A common complaint in Hong Kong is that the cost of living is high because most of the city’s stores, bus companies, residential and office buildings and utilities are owned by a small group of tycoons who have little incentive to compete with one another.

The Hong Kong-based ParknShop, established in 1973, has more than 300 outlets in Hong Kong, Macau and southern China. As of 2012, its 33.1% share of supermarket sales in Hong Kong was second only to Wellcome’s 39.8%, Euromonitor said. China Resources Enterprises Co.’s 0291.HK -0.85% CR Vanguard Supermarket was third with 7.8% market share.

ParknShop entered the China market in 1984 with a store in Shenzhen. China’s supermarket sector is highly fragmented with no dominant player. Lianhua Supermarket Holdings Co., 0980.HK 0.00% which is owned by Brillance Group Co., was the largest supermarket operator in the country last year with 1.5% market share, according to Euromonitor.

Hutchison Whampoa doesn’t disclose financial figures for ParknShop. According to its annual report, the company’s Hong Kong operations recorded growth in earnings before interest and taxes last year, driven by cost efficiency, while its China operations reported a decline in revenue and also in earnings before interest and taxes, amid slower economic growth.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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