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Aeon Co may announce RM764.8mil Carrefour buy this week [30-10-2012]  
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Japan-based Aeon Co will officially announce the purchase of France-based Carrefour SA's Malaysian business operations this week, a news report published in The Nikkei said.

The deal is expected to be priced at around 20 billion yen (US$250mil or RM764.8mil), according to The Nikkei, as Carrefour has been struggling to come up with cash to cut debt and fund the revival of its struggling European hypermarkets.

The Wall Street Journal reported that Aeon, which operates 29 stores in Malaysia, was in negotiations to buy Carrefour's 26 stores, which would bring the former close to the top spot among retailers.

“We have no comments on this as it is not related to Aeon Malaysia at this stage,” AEON Co (M) Bhd's (Aeon Malaysia) public relations executive personnel Ann Marie told StarBiz over the telephone.

Analysts contacted by StarBiz said it was likely that Aeon Malaysia would sooner or later be involved in a likely merger situation to synergise and consolidate both their operations.

RHB Research retail analyst Lee Wee Sieng said in his report that the deal, should it eventually materialise, would be positive for Aeon Malaysia as there would be “significant” operational synergies and “economies of scale”.

“Besides, the acquisition will reduce direct competition for Aeon's supermarket operations,” Lee said, adding that there were risks for Aeon Malaysia due to intensifying competition in the local retail scene.

OSK Research consumer sector analyst said the deal would make Aeon Malaysia the No. 1 supermarket operator and one of the largest retailers in Malaysia.

“The business acquired is likely to be placed under the wings of Aeon Malaysia.

“The acquisition will benefit the company as it will broaden the group's market since Aeon is a department store targeting the middle-income group while Carrefour is a hypermarket operator catering to the low-to-middle-income consumers,” OSK said.

However, OSK added that there could be a drawback due to possible cannibalisation with regard to Aeon Malaysia's four existing MaxValu stores, which are its value-for-money standalone stores.

Aeon Malaysia would likely need to finance the buyout either with debt or equity financing should the acquisition be made at the Malaysian operations level, OSK said, adding that a possible debt financing would see its gearing levels at 35.3%.

It is to be noted, however, that earlier reports stated that Carrefour, which operates the Malaysian stores under the company named Magnificient Diagraph Sdn Bhd, had also previously been brought to court by its former bumiputra partner and 30% shareholder Tan Sri Abdul Aziz Shamsuddin through Hartajaya Harmoni Sdn Bhd.

Hartajaya Harmoni, in its petition filed by its solicitors, alleged that there had been an intention before by Magnificient Diagraph's foreign majority shareholders to forcibly take away the former's 30% stake in the latter for no valuable consideration and thereafter sell the company to potential bidders.

Hartajaya Harmoni claimed the decision of these shareholders to invite bids for the 100% purchase of Magnificient Diagraph was done without the knowledge of and consultation of its 30% shareholder.

Hartajaya Harmoni had earlier claimed in its petition there were about four bidders that had expressed interest in buying over Carrefour's business and operations in Malaysia, Singapore and Thailand.

These bid prices had ranged from RM3.1bil to RM3.6bil, the company claimed.

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