This article first appeared in The Edge Malaysia Weekly on May 1, 2023 - May 7, 2023
MY Hero Hypermarket Sdn Bhd, the operator of the HeroMarket grocery chain and Hero Save Mart stores, have approached private equity (PE) firms including Navis and Intermediate Capital Group (ICG) with a view to selling the chain for some US$100 million (RM445 million), sources say.
My Hero, which operates 25 HeroMarket and six Hero Save Marts, had hired OCBC Advisers (M) Sdn Bhd as the financial adviser to negotiate a deal with potential purchasers and to conduct the sale process. It was founded by Francis Teng and his son Austin, who now own 80% and 13.6% respectively of the company. The remaining 6.4% held by Francis’ wife Poo Eng @ Aw Poo Eng.
OCBC Advisers declined to comment when contacted.
Sources tell The Edge that OCBC Advisers had spoken to Navis and ICG only “a few weeks back” and that it was safe to assume that the advisers had approached other PE firms as well.
In Malaysia, Navis holds a stake in TFP Retail Sdn Bhd, which operates the Village Grocer and Ben’s Independent Grocer (BIG) premium grocery stores. ICG, meanwhile, backs hypermarket operator TF Value-Mart, which focuses on second-tier cities.
News that the My Hero owners were planning to sell the business emerged in February. They were said to be seeking US$100 million for it, although two separate sources say that this price is “negotiable”.
“They may drop their expectations to accommodate the sale,” said one of the sources.
Industry observers note that the HeroMarket chain is managed by retailers with a proven track record. Francis and his siblings founded the very first Giant store in Kelana Jaya in 1982.
In a document sighted by The Edge called “Project Hawkeye”, OCBC Advisers highlighted that the grocer, which opened the first HeroMarket store in 2005, is now operating over 450,000 sq ft in retail space. It also has over 300,000 sq ft of distribution centre space.
While most of the stores are in the Klang Valley, HeroMarket also has a presence in Kedah, Penang, Negeri Sembilan and Johor.
For 2023, new openings have been identified in Puncak Bestari and Section 13, Shah Alam in Selangor; and in 2024 in KIP Mall, Sungai Petani, Kedah. The retailer is also said to be in active negotiations for openings in Negeri Sembilan and Klang, Selangor. In 2020, the company acquired 4.3 acres of land in Kampung Baru Subang in Selangor to construct a warehouse.
The last publicly available data on the Companies Commission of Malaysia (SSM) website is for the financial year ended June 30, 2021 (FY2021). The company was made exempt private from FY2022. An exempt private company has to be solvent and not have more than 20 individuals as its shareholders.
A combination of SSM data and source information reveals that My Hero posted RM840.4 million in revenue in the financial year ended June 30, 2022 and RM844.3 million in FY2021. Gross profit came in at RM146.3 million and RM147 million, respectively.
The company has projected revenue of RM946.4 million in FY2023, RM1.076 billion in FY2024 and RM1.229 billion in FY2025, representing a compound annual growth rate of 11%, as contributions come in from both same-store growth and the opening of new stores.
As at June 30, 2022, My Hero had total assets of RM232.3 million against total liabilities of RM170.4 million. SSM records show that in FY2021, the retailer posted a net profit of RM23.24 million and had retained earnings of RM44.59 million.
It is learnt that My Hero owns seven properties, of which four are used as stores and two are for new planned openings.
Meanwhile, it is worth noting that Francis and his family are also behind hardware store Ace Hardware in Malaysia, operated by Giant Ace Sdn Bhd. He is also the founder of RM2 store Noko, which is operated by Megah Inovatif Sdn Bhd. Francis owns 22% of Ace Hardware and 97% of Noko.
Incidentally, Francis’ brother Teng Yew Huat was the founder and operator of premium supermarket chain Jaya Grocer, which in December 2021 was sold to ride-hailing and delivery firm Grab Holdings Ltd in a deal worth RM1.8 billion.
Just 17 days before Grab announced the purchase, Yew Huat, who owned 55% in Jaya Grocer, bought back a 45% stake previously sold to AIGF Advisors Pte Ltd in 2016. Yew Huat paid about RM411 million for the stake, which gave the family full control of the business, thus making way for the sale to Grab.
The first Jaya Grocer opened in 2007, just another milestone in store openings for the Teng family.
Teng Sek How — the father of Francis and Yew Huat — opened his first sundry shop in 1944 in Jalan Sentul, Kuala Lumpur.
Years later, the brothers launched the well-known Teng Minimarket Centre, popularly known as TMC, in Lucky Garden, Bangsar. The family also founded the Giant hypermarket chain. In 1999, TMC and Giant were sold to Dairy Farm International Holdings Ltd (now known as DFI Retail Group Holdings Ltd).
Interestingly, in February, DFI Retail sold its grocery business operated by GCH Retail (M) Sdn Bhd — which also operates the Mercato, Cold Storage and Giant Mini brands in Malaysia — to a special purpose vehicle, Macrovalue Sdn Bhd, led by local businessman and entrepreneur Datuk Andrew Lim Tatt Keong for an undisclosed sum.
Other grocery mergers and acquisitions in recent years include that of Singapore-based private equity firm KV Asia Capital Pte Ltd, which in 2021 exited the TF Value-Mart business following a management buyout by a group of Malaysians funded by the UK’s ICG.
A year earlier, Tesco’s Malaysian business was purchased by Thailand’s Charoen Pokphand Group’s CP Retail Development Co Ltd and renamed Lotus’s.
Save by subscribing to us for your print and/or digital copy.
P/S: The Edge is also available on Apple's App Store and Android's Google Play.