KUALA LUMPUR (Feb 23): DFI Retail Group, which entered the Malaysian market 24 years ago through the acquisition of Giant, has decided to exit the increasingly competitive grocery retail industry.
In a statement on Thursday (Feb 23), the group said it had entered into an agreement with a Malaysian retail group led by local businessman and entrepreneur Datuk Andrew Lim to sell all of DFI’s food businesses in Malaysia, including Giant.
DFI operates a total of 40 Giants, eight Mercatos, two Cold Storages, one TMC and 40 Giant Mini stores. The deal is expected to be completed in early March 2023.
Lim is the group deputy chairman of SOGO Department Store Sdn Bhd and the executive chairman of GAMA Group, which owns and operates GAMA Supermarket & Departmental Store in Penang.
The announcement confirms The Edge’s report that DFI would be selling its grocery business in Malaysia.
DFI has been operating the business in Malaysia through GCH Retail (Malaysia) Sdn Bhd. GCH Retail is 70% owned by DFI and 30% by Syarikat Pesaka Antah Sdn Bhd, a company linked to Negeri Sembilan royalty.
A company called Macrovalue Sdn Bhd was incorporated to take over GCH Retail.
Macrovalue is equally owned by USP Resources Sdn Bhd and Gyap Holdings Sdn Bhd. Lim owns all but one share of USP Resources.
USP Resources wholly owns GAMA. USP Equity Sdn Bhd, in which USP Resources holds 50%, owns 90% of SOGO (KL). This means that effectively, SOGO, GAMA and GCH Retail will now have a common shareholder.
Meanwhile, Gyap is 90% owned by Datuk Gary Yap Keng Fatt and 10% by Yap Lin Han. Yap is said to be the person behind Euro Deli Shop Sdn Bhd, a company that specialises in imported meat and sausages from Europe.
DFI says the new retail group shares similar beliefs as DFI in delivering great quality, service and value to customers.
“By bringing these businesses together, under experienced local ownership, both customers and team members will continue to benefit from the positive changes to Giant, Cold Storage and Mercato that have taken place in recent years, forging an exciting platform for future growth through deep market knowledge, brand investment and competitive strength,” DFI said.
The new owners plan to retain all 2,500 staff.
GCH, which had aggressively shut stores in Malaysia since 2019, bringing the total number of stores to less than half by 2021, undertook a revamping, resizing and repositioning exercise to return to the black. It also started opening Giant Mini.
Between 2014 and 2019, GCH was in the red. It returned to the black in 2020, posting RM12.23 million net profit.
However, it slipped back into the red in FY2021. It is yet to file its financials for the year ended Dec 31, 2022. In FY2021, the retailer posted a net loss of RM106.17 million on the back of RM2.38 billion in revenue.
It had total liabilities of RM2.71 billion and total assets of RM1.23 billion.
The statement did not reveal how much the business was sold for.
While sources say that the deal is valued “at least a couple of billion ringgit”, some say that the new owners may be assuming the debt of GCH as part of the purchase price.
Commenting on the deal, DFI's CEO for Southeast Asia, Chris Bush, said: "We are delighted to be able to transition our food business to such a well-respected and successful local retail group, who will also be retaining our dedicated team members. This is a win for both our customers and team members — by combining our food business with the local retail group’s other retail businesses, this will provide greater competitiveness, service and value for customers in Malaysia."
He said he has complete confidence in the future success of the food business under their leadership, and that it is the best outcome for all.
Meanwhile, Lim said as the new owner, Macrovalue will endeavour to the best of its abilities to add value and to enhance the respective brand equities of the Cold Storage, TMC, Giant and Mercato brand names in Malaysia.
GCH entered the country in 1999 via the purchase of a 90% stake in the Giant business, which was then operated by the Teng family. At the time, there were seven stores — five supermarkets and two hypermarkets.
DFI is incorporated in Bermuda and has a main listing on the London Stock Exchange and secondary listings in Bermuda and Singapore. It is not known how the sale of the Malaysian business will impact the listed entities.
Meanwhile, DFI stressed that it will continue to operate the health and beauty chain under Guardian Health & Beauty Sdn Bhd.
Bush says DFI remains fully committed to its retail business in Malaysia, sharpening its strategic focus on the fast-growing health and beauty business and will continue to wholly own and operate Guardian Health and Beauty stores. “The company has exciting plans over the next two years — continuing to refresh the Guardian store format and significantly expanding its store network (currently over 500), with the expected creation of hundreds of jobs,” Bush said.
He adds that the transition will enable it to focus its priorities exclusively on the expansion of its Guardian Health and Beauty business in Malaysia.
"We are very excited by the opportunities for Guardian as it continues to grow rapidly, bolstered by the significant expansion of our store network, store refurbishments and improved customer offerings. This move will allow us to have an even greater impact for our customers as we build on our strengths in delivering excellence to our customers every day," he added.