KUALA LUMPUR: Aeon Co (M) Bhd (Aeon Malaysia) touched a historical high of RM13.18 yesterday before closing at RM12.98 yesterday as news of the retailer’s parent Aeon Co Ltd’s potential acquisition of Carrefour Malaysia emerged again, this time for slightly over ¥20 billion (RM760 million).  

The counter closed RM1.04 or 8.71% higher than its previous close. “The market seems to be pricing in the acquisition,” said an analyst.

“There might be something behind the market speculation, leading up to the share price increase, as the value of the deal has also surfaced in the market,” said another consumer sector analyst.

“In spite of that, I cannot be 100% certain that the deal will happen,” she added.

The Nikkei last week reported that Japan’s number one supermarket operator Aeon, which has a 51% stake in Aeon Malaysia, may acquire Carrefour’s operations in Malaysia. The deal is expected to be finalised this week.

According to another report by Dow Jones, negotiations to buy Carrefour’s 26 stores are underway and an agreement is expected to be signed as early as next month.  

Rumours on this acquisition have circulated in the market before. In September, it was reported that both parties have entered into bilateral negotiations. However, Aeon denied the report.   

Analysts said the deal to acquire Carrefour is a platform for Aeon to expand its presence in Southeast Asia. Carrefour, on the other hand, needs to raise funds to reduce borrowings, and subsequently finance the rejuvenation of its hypermarkets in Europe.

Previously, Aeon released the “Aeon Group Medium-term Management Plan” which is scheduled for the period from March 1, 2011 to Feb 28, 2014.

According to the plan, the group will focus the allocation of management resources in four growth areas. One of the growth areas is the Asian markets.

“The company recognises that in addition to the Japanese market, business expansion throughout the Asian region, with its rising population and strong economic growth, will be essential in maintaining the growth of the Aeon group.

“In the year ended February 2012, the group laid a new foundation for Asian growth by starting plans for opening stores in Vietnam, Cambodia, and other new geographic areas, while also pushing forward to set up headquarter functions for China and an Asean headquarters to accelerate an integrated group approach to Asian business development,” said Aeon in the plan.

Both Aeon Malaysia and Aeon had not responded to the speculation as at yesterday.

“If the acquisition materialises, we view the deal as positive for Aeon Malaysia as there will be significant operational synergies and economies of scale with Aeon’s supermarket operations. Besides, the acquisition will reduce direct competition for Aeon’s supermarket operations,” RHB Research said in a note yesterday.

According to OSK Research, if the deal goes through, it will broaden Aeon Malaysia’s market since Aeon is a department store targeting the middle-income group while Carrefour, which is a hypermarket operator, caters to the low- to mid-income consumers.

“The only drawback might be the possibility of cannibalisation with regard to Aeon’s four existing MaxValu stores, which are its value-for-money standalone stores,” it said.

It added that based on the estimated cost of US$250 million for Carrefour Malaysia, and given Aeon Malaysia’s current net cash position of RM264 million as at June 2012, the group will need to finance the buyout with debt or equity-raising should the acquisition be made at the Aeon Malaysia level.

“Assuming the company resorts to financing via debt, it will end up with a net gearing of 35.3% versus the current net cash position,” it said.

This story/article first appeared (or appeared) in The Edge Financial Daily, October 30, 2012.