This article first appeared in The Edge Malaysia Weekly on March 8, 2021 - March 14, 2021
US-based Carlyle Group and Luxembourg-based CVC Capital Partners are believed to be the front runners in the race to acquire Trendcell Sdn Bhd, the owner and operator of high-end supermarket chain Jaya Grocer, say sources, after outbidding at least two other offers.
It is learnt that the two private equity firms are negotiating to buy a part of, a majority, or the entire supermarket business of Trendcell, which rang up RM1.32 billion in sales in 2020, for as much as RM1.1 billion.
The sale, if successful, will mark the exit of Asean Industrial Growth Fund (AIGF), which purchased a 45% stake in Trendcell in May 2016 for a reported RM300 million. Businessman Teng Yew Huat is the other major shareholder of Trendcell.
“Negotiations are still ongoing. AIGF wants to sell its (45%) stake but (all) owners are open to the sale of a majority or even the entire business,” one source says, pegging a 100% stake in the business at between RM800 million and RM1 billion.
In order to gain control of Trendcell, the PE firms are willing to accord Trendcell a higher value, another source tells The Edge. “CVC and Carlyle are bidding for control at RM1.1 billion,” the source says.
Carlyle, which has its headquarters in Washington DC, has US$246 billion in assets under management, and CVC, US$109.1 billion. The latter already has investments in Malaysia in companies such as QSR Brands (M) Holdings Bhd and KFC Holdings (M) Bhd.
It is learnt that CVC and Carlyle were picked over at least two other offers, from Malaysian PE fund Creador and Japanese retailer AEON Co Ltd.
It is unclear if AEON’s bid was made directly from Japan, or through one of the two local operations run by the retailer — department store AEON Co (M) Bhd and hypermarket AEON BiG. AEON Group Malaysia CEO Shafie Shamsuddin and Creador founder Brahmal Vasudevan declined to comment when contacted.
In 2010, Carlyle emerged as a potential investor of QSR Brands but nothing came of it. Three years later, CVC emerged as a stakeholder in QSR Brands after the PE fund — together with Johor Corp and the Employees Provident Fund — took the company and KFC Holdings private.
CVC also has a presence in Malaysia through its investments in biscuit and confectionery company Munchy’s and funeral and bereavement care provider Nirvana Asia.
In September 2020, The Edge reported that Trendcell, which posted a 144% jump in net profit in FY2020, was possibly looking to make an exit. A month later, Bloomberg reported that the deal would be worth more than US$200 million.
Trendcell, which is wholly owned by Jaya Grocer Holdings Sdn Bhd, operates close to 40 stores. The directors of Trendcell are Yew Huat, Daniel Teng Tu Yoong, Anthony Teng Tu King, Daniel Yong Teck Seong and Tetsuro Ono.
The shareholders of Jaya Grocer Holdings are Yew Huat (55%) and Timbang Perkasa Sdn Bhd (45%). Tu Yoong and Nor Samsiah Abdullah Din own one share each. All but one share in Timbang Perkasa is held by Acme (M) Holding Pte Ltd. The one share is held by one Zaidaton Akmah Yeop.
Acme Malaysia is wholly owned by AIGF Fund Co Pte Ltd, which in turn is owned by AIGF LP, a company incorporated in the Cayman Islands.
CIMB Private Equity Sdn Bhd and Mitsubishi Corp each own 45% of AIGF, and the remaining stake is held by Development Bank of Japan.
A search on the Companies Commission of Malaysia website reveals that in the financial year ended June 30, 2020, Trendcell recorded a net profit of RM67.04 million, from RM27.49 million in FY2019. This was achieved on the back of a 41.4% growth in revenue to RM1.32 billion from RM933.48 million in FY2019.
As at June 30, 2020, the total liabilities of the supermarket chain stood at RM311.89 million, of which RM233.8 million was current. Its accumulated profit amounted to RM82.08 million.
Founded in 2007 by the Teng family, Jaya Grocer was set up with the aim of establishing a premium supermarket brand. Yew Huat’s father, Teng Sek How, opened his first sundry shop in 1944 in Jalan Sentul, Kuala Lumpur, and later, Yew Huat and his brothers opened the well-known Teng Minimarket Centre, popularly known as TMC, in Lucky Garden, Bangsar. TMC was later sold to Dairy Farm International.
The first Jaya Grocer outlet was opened in Jaya 33 in Petaling Jaya, Selangor.
As recently as December, Singapore-based private equity firm KV Asia Capital Pte Ltd exited from TF Value-Mart, a popular hypermarket chain operating in secondary towns that reported a revenue of RM1.48 billion in FY2019.
KV Asia’s exit followed a management buyout, assisted by financing from Intermediate Capital Group plc (ICG), which not only funded the buyout, but also acquired a stake in the hypermarket operator via its Asia Fund IV. The deal was reportedly done at RM850 million.
In February, Bloomberg reported that Navis Capital Partners was exploring a sale of its shareholding in The Food Purveyor Sdn Bhd, which owns the Village Grocer and Ben’s Independent Grocer (BIG) supermarket chains.
Navis Capital owns 74.91% of The Food Puveyor while 23.25% is held by Armani Wealth Sdn Bhd, which in turn is owned by Pasaraya OTK (Gombak) Sdn Bhd. The other shareholders of The Food Purveyor are Benjamin Yong Kwet Yue (0.62%), Geoffrey King (0.42%), Charles Tseng@Charles Tseng Chia Chun (0.38%), David Lee Tseng (0.26%) and Khor Geik Mei (0.16%). Navis is understood to have invested US$68 million in Village Grocer and US$14 million in BIG.
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