Sunday, August 22, 2010

PTT may pursue Carrefour

right: Mr.Prasert Bunsumpun President and Chief Executive Officer, PTT Plc.

PTT Plc, Thailand's largest energy business, confirmed yesterday that it was among six interested bidders for the assets of the French retailer Carrefour in Thailand, saying it might benefit the group's retail oil business.

Prasert Bunsumpun, the president and CEO of PTT, surprised analysts in a meeting on Thursday night by revealing the company might diversify into the retail business through Carrefour hypermarkets. The Thai assets are estimated to be worth about US$600 million or 19 billion baht.

When Carrefour announced some of its Southeast Asian assets were for sale two months ago, the interested bidders in the Thai operation were rumoured to include Berli Jucker (BJC), Tesco Lotus, Saha Group and Big C. However, PTT is only the second company after BJC to confirm its interest.
Mr Prasert said that even though PTT was an energy company, retail sales were not "too far" from its core business.

"We don't want to be Central [Department Store], but as an oil company we can do a lot more than you would imagine if you are open to it. The trend in Europe and England is for petrol dispensers providing service to motorists at Carrefour hypermarkets. So couldn't that be possible here?" he asked rhetorically.

When Carrefour put fuel pumps at its hypermarkets, it drove up sales of both the stores and of fuel, he said.

"If we were talking about running hotels, sure that may be impossible, but not for a retail business. Do you know some casinos are run inside petrol stations? This is not the first time we considered working with retail, as long ago we asked Big C whether it would be possible to open a petrol service inside their stores, but received no response," said Mr Prasert.

"We believe we could create synergies with PTT's retail oil operations with Carrefour. Of course, it would not become our core business if we buy it."

Mr Prasert admitted the success rate of its bid was lower than 5%, and that competition in the retail arena, where PTT lacks experience, is fierce.

A final decision on whether PTT will bid has not been made, but it is studying details.

Analysts expressed doubts about how much the acquisition would benefit PTT's existing businesses.

"I think it is likely a done deal," said Sutthichai Kumworachai, an analyst at KGI Securities. "But there is still a big question about how much this helps the company. PTT does not have any expertise in this business at all."

An analyst from Globlex Securities said the synergies between Carrefour and PTT would not be significant and the likelihood of a deal was minimal given the competition from other interested bidders with more retail expertise. Also, the return on investment from the assets would not be high, he added.

A source from CP All Plc, the local operator of 7-Eleven convenience stores that are located in many PTT stations, said it was possible that PTT would successfully buy Carrefour in Thailand because PTT had earlier expanded its retail business by taking over Jiffy and Jet stores.

PTT is a cash-rich company, and those liquid assets could provide some of the money needed to acquire Carrefour, while the hypermarket in France has operated fuel stations allowing for synergy, the source said.

Shares of PTT closed unchanged yesterday on the Stock Exchange of Thailand at 266 baht in trade worth 1.85 billion baht.

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