Berli Jucker, a Thai company controlled by tycoon Charoen Sirivadhanabhakdi, struck a deal on Thursday to buy German retailer Metro's cash and carry business in Vietnam for an enterprise value of €655 million ($876 million) to beef up its retail presence in Vietnam.
Singapore-listed Frasers Centrepoint, a property firm also controlled by Charoen, is in the midst of taking over property firm Australand, and made an unconditional offer for the company also on Thursday.
Berli Jucker will acquire 19 wholesale stores across the country with about 3,600 employees, and once the deal is completed, it will become the second-largest retailer in the grocery market in Vietnam after domestic retailer Saigon Co-op. The cash and carry business it is buying generated sales of €516 million during the pro forma financial year 2012/13.
The deal marks an exit for Metro, the third-largest retailer globally, from Vietnam's retail market. According to a source familiar with the matter the company was not looking to sell, but received an unsolicited bid from Berli Jucker that was sufficiently compelling to prompt the disposal.
Other companies had also knocked on the door, and according to media reports CP All, controlled by another Thai tycoon had run a slide rule over the company.
Thai companies have been active in the consumer retail space. Notably, CP All bought cash and carry operator Siam Makro from Dutch trading firm SHV for $6.6 billion last year. Berli Jucker had also reportedly looked at the deal, but CP All had moved much faster and secured it with a hefty bid. In 2011, Thailand's Central group, controlled by Thailand's Chirathivat family also bought Italian department store La Rinasciente.
The deal gives Berli Jucker scale in Vietnam, a fast-growing and underpenetrated retail market. Vietnam has a growing middle class and increasingly affluent population that is expected to treble to 33 million by 2020.
The Metro group will be focusing on key businesses in Asia, mainly in Pakistan, India and China. "Asia will remain as important as ever to Metro group and we will continue to invest into the focus and expansion countries of Metro cash & carry, as well as into strategically important customer-focused projects like multi-channel retail," Olaf Koch, Metro management board chairman said in a statement.
However, besides Vietnam, the German retailer, has been scaling back expansion plans elsewhere in the region. It had originally planned a store expansion in Indonesia in 2011 but put those plans on hold a year later.
The deal had an enterprise value of Bt28.7 billion and the Vietnam cash and carry business posted a net profit of Bt2.3 billion for the 12 months ended March 2014. Based on that number, the deal was struck at an enterprise value to net profit multiple of 12.4 times. By comparison, CP All paid a multiple of 53 times Siam Makro's 2012 earnings per share.
Metro had entered the Vietnamese market in 2002. Berli Jucker will be funding the acquisition through new debt facilities and the funding arrangements will be approved at a board meeting on August 19. HSBC advised Metro and Lazard advised Berli Jucker.
The M&A market for retailers have been active during the past year. Li Ka-shing's Hutchison Whampoa sold a 24.9% stake in beauty chain AS Watson to Singapore investment holding company Temasek for $5.6 billion in March. The following month, Chinese retail Sanpower Group also bought House of Fraser, a 165-year British department store chain in a £480 million deal.
