A.S. Watson sale tipped to hit price snag again
With Li Ka-shing reviewing the retail operation, observers say impasse over the ParknShop valuation is likely to resurface with any sale move
Li Ka-shing's determination to cash out of the AS Watson retail businesses after his recent setback in offloading his ParknShop supermarket assets is likely to meet the same problem: buyer resistance on price.
At least four companies - Thai industrial giant Charoen Pokphand Group, Australian retailer Woolworths, state-owned China Resources Enterprise and Japan's Aeon - were expected to submit bids before the deadline. But only two companies made non-legally-binding bids, which were both far below the seller's expectations.
"It shows in today's market environment how difficult it is for Li Ka-shing to find the right buyer for the price level that he and his investment bankers believe is right for the asset," said one source close to the situation.
Another source, who also declined to be identified because of bidding confidentiality, said: "We're talking about US$1 billion or even US$2 billion in difference [between the bids and the expected price level] rather than just several hundred million. Such a big difference can easily and quickly kill the deal because there will be almost no room for negotiations."
Woolworths and the CP Group were the only firms to proceed with bids for ParknShop, which, with its main rival Dairy Farm International's Wellcome, accounted for more than 70 per cent of Hong Kong's grocery market last year. ParknShop is part of the AS Watson retail businesses owned by the Li-controlled Hutchison Whampoa.
Both bidders valued any deal to buy the supermarket chain at less than US$3 billion. Hutchison's target price was US$4 billion, the sources said.
