KKR considers bidding for ParknShop chain

PUBLISHED : Thursday, 01 August, 2013, 12:00am
UPDATED : Thursday, 01 August, 2013, 5:38am

Private-equity firm KKR is evaluating a bid for the ParknShop supermarket chain, said two people with knowledge of the matter.

KKR, which is talking to banks about financing for a potential deal, may decide not to make an offer, said the sources. ParknShop owner Hutchison Whampoa has asked potential buyers to submit bids for the chain by August 16, people with knowledge of the process said last week.

Hutchison is seeking US$3 billion to US$4 billion for ParknShop, one of the city's two main supermarket chains, according to a person familiar with the matter. That would make it KKR's biggest deal in Asia, data shows, surpassing the US$1.8 billion purchase of South Korea's Oriental Brewery in 2009.

"This is ideal for private equity because it's an asset that can generate very steady cash flows," said Cusson Leung, an analyst at Credit Suisse. "Even though the growth is slower, Parkn- Shop operates in a very stable market."

A private-equity buyer could consider spinning off ParknShop as a business trust after acquiring it, Leung said. Buyout firms typically use borrowed money to help finance acquisitions, using the target's cash flows to repay the debt. A KKR spokesman declined to comment.

Hutchison is conducting a strategic review of ParknShop, which had more than 270 stores and sales of HK$21.7 billion in 2012, as it makes acquisitions in faster-growing industries such as telecommunications. Hutchison had sales of HK$398 billion last year.

At US$4 billion, ParknShop would be valued at about 1.4 times sales.

Chinese supermarket group Wumart Stores, in which US private equity firm TPG Capital owns a stake, trades at 1.1 times last year's revenue, while Dairy Farm International, the owner of the Wellcome supermarket chain in Hong Kong, carries a multiple of 1.65, data shows.