Casino Guichard-Perrachon SA agreed to sell Vietnam’s Big C grocery chain to Central Group at an enterprise value of 1 billion euros ($1.1 billion), extending an Asian divestment program aimed to reduce the French retailer’s debt.
Casino will receive 920 million euros in proceeds, the St. Etienne, France-based company said in a statement Friday. The disposal will bring the total of its divestments to 4.2 billion euros, it said. The shares rose as much as 2.1 percent in early Paris trading.
The deal follows Casino’s agreement earlier this year to sell control of Thai supermarket chain Big C Supercenter Pcl to billionaire Charoen Sirivadhanabhakdi’s TCC Holding Co. for 3.1 billion euros. Casino is selling assets to cut borrowings amid an attack from short seller Carson Block, who has said the retailer has a “dangerously” high debt burden -- an assertion the company denies. Standard and Poor’s cut Casino’s credit rating to junk in March.
“This is another piece of good news for Casino,” said Bruno Monteyne, an analyst at Sanford C. Bernstein. “We expect the high valuation to act as a catalyst for the stock. This comes as welcome news after some were suggesting the sale wouldn’t go through after Lotte had pulled out.” South Korea’s Lotte Group said April 22 that it wouldn’t pursue the asset, without giving a reason.
Casino is selling assets in Asia and Latin America to cut debt, while focusing on price and convenience in its largest market, France, as it competes for growth amid weak consumer spending.
Rising retail sales and booming foreign investment are helping the Vietnamese economy expand. Achieving the government’s growth forecast of about 6.7 percent this year would make the Southeast Asian nation one of the fastest-growing markets in the world. Consumer-product companies including Dutch brewer Heineken NV and Dove soap maker Unilever have experienced strong growth in the country over the past year.
You’ve got a young population. They like to go shopping, they like the convenience of it all and they can afford mid-level range products now.”
“The retail market is booming here,” said Ralf Matthaes, managing director of consultancy Infocus Mekong Research in Ho Chi Minh City. “The bottom line is every Tom, Dick and Harry is trying to come in here. You’ve got a young population. They like to go shopping, they like the convenience of it all and they can afford mid-level range products now.”
Vingroup Joint Stock Co., Vietnam’s biggest listed property developer, planned last year for its Vinmart unit to open 100 supermarkets and 1,000 convenience stores by 2017, according to state media Vietnam News.
Matthaes said it’s a crowded field and many supermarkets and convenience stores are not profitable. “The Vietnamese guys are opening left and right. They’re not making money but they’re looking to sell.”
Lotte Group said last year that it plans to open 60 supermarkets in Vietnam by 2020. The South Korean retail giant also runs Lotteria fast-food chains, shopping malls, hotels and cinemas in the country.
TCC in January completed the purchase of Metro AG’s Cash & Carry wholesale business in Vietnam for 655 million euros.
“Vietnam’s retail market is still in its infancy,” said Bloomberg Intelligence analyst Thomas Jastrzab. “This makes it attractive to retailers looking for fast growth potential.”