CPF Pays Less but Get More…!!!

As everyone already known that a Thai billionaire Dhanin Chearavanont of CP Group has declared the victory of acquiring the Tesco Lotus both stores in Thailand and Malaysia. The bidding winner spent about 330 billion baht to reconquer the beloved gold mine.

CP Group this time has changed the strategy by adjusting a new buying equation. CP Group settled a holding company, a Charoen Pokphand Holding Co., Ltd. to hold 40% of Tesco Lotus acquisition along with 40% holding by CP ALL Public Company Limited (CPALL) and Charoen Pokphand Food Public Company Limited (CPF) holds another 20%.      

The financial reconstruction is aimed in accordance with a company fiscal liquidity…(to reduce a pressure on CPALL stocks that previously existed a worrisome as it would carry a big debt)

Moreover, the new adjustment helps to diminish the risk of having market monopoly or market dominance ingeniously. 

Well… really have to thumb up to whoever behind this deal …!

Since this deal was worth a fortune of 330 billion baht, recording as a historical highest buyout or M&A in Thailand. (When CPALL was takeover Makro, the value of acquisition reported only 180 billion baht, MINT has acquired NH Hotel Group, S.A. (NHH) approx. 90 billion baht while GPSC acquired GLOW with the amount of 93 billion baht)

At same time, leading to be questioned that is this deal worth it …?

Okay … in the initial stage, there may not appear a business synergy between CPALL and Tesco Lotus because it needs to be restructured beforehand.

The highlight of this deal is that, CPF pays less, buy get more…!!!  

Initially, CPF estimated to pump approximately 47 billion baht in proportion to its 20% stake. And what will be returned to CPF is a goods distribution channel of Tesco Lotus in Thailand with over 2,000 branches, including Tesco Lotus in Malaysia as well.

CPF currently distributes its sell through Tesco Lotus in Thailand for only 700 million baht per year, equivalent to 0.1% of CPF overall revenue. After this, the proportion of such revenue should be increase significantly.

In addition, CPF can also exercise Tesco Lotus logistics to transport fresh and frozen food which will lowering the cost.

As well as having the opportunity to expand more branches of CP Freshmart into Tesco Lotus stores. Currently, Tesco Lotus has a total rental area of ​​approximately 1 million square meters through 191 branches with the tenants of food services just 10%.

It could says that the return from the enormous acquisition is truly worth it…!!!

Analysts are now encouraging to “Buy” CPF with the highest target price of 39 baht. But if anyone see differently then do not worry…

Whatever pleases you…