This article first appeared in The Edge Malaysia Weekly on May 3, 2021 - May 9, 2021

TAN Sri Desmond Lim Siew Choon, who is active on the retail scene through his mall operations, is set to venture into the grocery retail market with the launch of a premium supermarket brand called The Food Merchant. Sources say he plans to open up to 15 stores in the next five years, with the first outlet slated to open at his own mall in the third quarter of the year.

The move into grocery retailing in partnership with The Food Purveyor Sdn Bhd, the operator of Village Grocer and Ben’s Independent Grocer (BIG), will allow Lim to capitalise on synergies between both retail segments. He will hold a 40% stake in Global Food Merchant Holdings Sdn Bhd, with the remaining 60% held by The Food Purveyor, which is majority-owned by private equity (PE) fund Navis Capital Partners.

“Lim wants to open between 10 and 15 stores over the next five years, starting with stores at his own malls. The first will open at Pavilion Bukit Jalil,” a source tells The Edge. This will be followed by an outlet at Pavilion Damansara, Kuala Lumpur, when the shopping centre is ready. Other malls operated by Lim include Pavilion Kuala Lumpur, Intermark Mall Kuala Lumpur and Da Men in Selangor held though Pavilion Real Estate Investment Trust, and Paradigm Mall in Selangor and Johor held via WCT Holdings Bhd.

It is learnt that a suitable grocery concept will be curated according to the location. A typical store could be as large as 50,000 sq ft in net lettable area, with up to 25% of the space comprising food halls offering experiential gastronomy concepts and handling takeaways.

Navis reportedly invested US$68 million in Village Grocer in September 2014 and another US$14 million in BIG in 2017. Generally, PE funds’ exit strategy is to either to sell their stake or go public.

In February, Bloomberg reported that Navis was exploring the sale of The Food Purveyor, whose business could be worth about RM1 billion.

However, The Edge has learnt that Navis’ exit strategy from The Food Purveyor, in which it holds a 74.91% stake, may have changed following the new partnership with Lim. Sources say its plans to exit may have been postponed and that Lim may eventually buy Navis’ stake. If this happens, he will have immediate control over The Village Grocer, BIG and Pasaraya OTK, which now has 40 stores.

Incidentally, Lim recently purchased the Plaza Batai shoplots in Damansara Heights, Kuala Lumpur, which are popular for their upmarket restaurants, from Selangor Properties Bhd. One of the tenants at Plaza Batai is BIG.

The Food Purveyor’s group executive director Ivan Tan declined to comment when asked to confirm Lim’s involvement or interest in Navis’ stake. Tan also sits on the board of Global Food Merchant.

A search on the Companies Commission of Malaysia’s (SSM) website shows that Global Food Merchant is owned by Tanjung Selatan (M) Sdn Bhd and The Food Purveyor on a 40:60 basis. Apart from Tan, Susan Low Mei Wan, Datuk Siew Mun Wai, Fua Chye Jin and Michael John Octoman are also directors of Global Food Merchant.

Siew, an independent non-executive director of Malton Bhd, is understood to be Lim’s representative on the board. Lim is the controlling shareholder of Malton and its non-executive chairman.

The shareholders of Tanjung Selatan — whose address is listed as Level 20, Pavilion Tower, Jalan Raja Chulan, Kuala Lumpur — are How Wee Teck and Lee Kian Jin, who each own 50% of the company. Their names appear in the annual report of Global Oriental Bhd, with How listed as having a 3.54% stake and Lee, 3.21%. How, Lee and Siew are directors of Tanjung Selatan.

While Lim’s name does not appear in the company searches, it has been widely reported that he works behind the scenes at Global Oriental. In 2019, The Edge reported that he was undertaking a project known as The Pavilion Genting Highlands in partnership with Global Oriental. Lim’s Pavilion brand is also being used by Global Oriental for its Jalan Ampang project called Pavilion Embassy.

Other dealings between Lim and Global Oriental include the sale of Da Men mall to Lim’s Pavilion REIT in 2015. In 2017, Global Oriental announced a joint venture with Malton for a mixed-use development in Cheras.

Sources tell The Edge that supermarkets have been performing well, especially over the past year, and that they tend to be the crowd puller at shopping centres. Hence, Lim’s venture into the grocery retail market makes sense.

“It’s easier to control an anchor than to be controlled by the anchor,” another source notes. Moreover, landlords are expected to have better negotiating power after Covid-19.

“Lim always wants the best anchor at his malls, including a supermarket,” says another source.

Meanwhile, an SSM search on The Food Purveyor shows that its shareholders are Armani Wealth Sdn Bhd (23.25%), Foodshop Capstone Sdn Bhd (74.91%), Benjamin Yong Kwet Yue (0.62%), Geoffrey King (0.42%) and Khor Geik Mei (0.16%). Two other shareholders, Charles Tseng @ Charles Tseng Chia Chun and David Lee Tseng, who hold 0.38% and 0.26% respectively in The Food Purveyor, are the main shareholders of new grocery outfit QRA.

The shareholders of Foodshop Capstone are Suridah Jalaluddin and Fua Chye Jin. Suridah owns all but one share in the company. Meanwhile, the shareholder of Armani Wealth is Pasaraya OTK (Gombak) Sdn Bhd.

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