Aeon, China Resources eye bids for Li Ka-shing’s ParknShop, say sources

Japan’s Aeon and state-owned China Resources Enterprise are among the suitors considering bids for ParknShop, the supermarket business being sold by billionaire Li Ka-shing, people familiar with the matter said.

Li’s Hutchison Whampoa conglomerate has set an August 16 deadline for initial bids for the business, with an asking price of up to HK$31 billion (US$4 billion), said the people, who declined to be identified because the sale process is confidential.

The auction is generating interest from companies and private equity firms, lured by the opportunity to operate in a market that is dominated by two large players. Octogenarian Li is planning to sell the business to focus more on Hutchison’s health and beauty retail operations, which have a bigger global footprint and offer higher margins compared with the supermarket business, the people said.

Australian retailers Woolworths and Wesfarmers and China’s Sun Art Retail are among the other suitors evaluating bids, the people added.

“Hong Kong is a saturated market, and we can only expect very stable or even flat growth in the supermarket business, which may not be attractive to investors seeking speedy returns,” said Linus Yip, chief strategist at First Shanghai Securities.

“But foreign operators may find it appealing if they want to tap the China market through ParknShop as a stepping stone.”

Li’s ParknShop and Singapore’s Dairy Farm International dominate Hong Kong’s supermarket business. ParknShop Has a 33.1 per cent share and Dairy Farm has 39.8 per cent, according to London-based Euromonitor. China Resources’ Vanguard Supermarket has a 7.8 per cent market share.

ParknShop, which operates 345 stores in Hong Kong, mainland China and Macau, earned HK$21.7 billion (US$2.8 billion) in revenue last year, according to the statement issued by Hutchison. About 270 of the stores are in located in Hong Kong.