CR Asia buys stake in Korean chain as net profits rise
Convenience Retail Asia, operator of Circle K stores, plans to buy 33 per cent of South Korea's fourth-biggest convenience store chain next year, aiming to complete a buyout within three years.
The company, a subsidiary of Li & Fung Retailing, yesterday said it had agreed to buy a 2.5 per cent stake in South Korean retailer Buy The Way for about HK$30 million from CCMP Capital Asia, a buyout fund spun out of JP Morgan Chase.
The deal was unveiled as Convenience Retail said half-year profit rose 8.9 per cent year on year to HK$32.4 million while sales rose 10.9 per cent to HK$1.07 billion.
Chief executive Richard Yeung Lap-bun said the firm was granted an option to another 30.5 per cent of Buy The Way next year.
The South Korean company's sales amounted to HK$3.4 billion last year from its 1,000 stores, he said.
CR Asia, which is headed by Li & Fung Group chairman Victor Fung Kwok-king, had 238 self-owned stores in Hong Kong, 51 stores in the Pearl River Delta and 20 franchised stores in Macau and Zhuhai.
Mr Yeung said the price of the additional stake for the Korean retailer had been fixed, which was 'roughly' in proportion to the price of the latest deal.
He declined to specify Buy The Way's profit but said its net profit margin was lower than Convenience's 3.01 per cent in the first half.
Convenience would acquire the remaining 67 per cent of the Korean retailer from CCMP Capital Asia in three to five years, Mr Yeung added.
'We consider this three-phrase approach to be of low risk for us to break into the Korean market,' he said.
'We hope our Korean operation can generate enough cash flow to fund our aggressive expansion in the mainland.'
Convenience, which aims to switch to a main board listing, has HK$600 million cash and no debt.
Mr Yeung said that the company may seek bank loans to fund the Korean stake acquisition next year and possible acquisitions of some Beijing and Shanghai retailers.
This year it would start integration of its 60 per cent-held Dongguan store chain Sun High which owns 200 franchised stores, said Mr Yeung.
Director Louisa Kwan said acquiring companies franchising stores would become the company's strategy if its Dongguan acquisition proved profitable.
Convenience Retail Asia's capital expenditure in the second half of this year would be between HK$30 million and HK$40 million, involving the opening of 18 Hong stores and 30 mainland stores, the company said.