Parkson Holdings - Stepping Into Sri Lanka With Odel

THE BUZZ

Yesterday, Parkson Retail Asia (PRA), a 67.6%-owned subsidiary of Parkson Holdings, announced that it has entered into a share sale and purchase agreement to acquire a 41.8% stake in Sri Lanka’s leading fashion retailer, Odel Plc, for RM34.3m.

OUR TAKE

Making its way to Sri Lanka. The 41.8% stake, or 60.63m shares in Odel, will be acquired from the Gunewardene Family at a 9.8% premium over the weighted average price of Odel on 25 July. Post acquisition, the Gunewardene Family will still own 60.3m shares in Odel, representing 41.8% of the company’s paid-up share capital.

Raising funds for Sri Lanka expansion. The proposed acquisition is expected to be completed sometime end-July or early August 2012. Subsequent to the transaction, PRA will have to make a general offer for all the remaining shares of Odel while the Gunewardene Family will provide an irrevocable undertaking not to accept PRA’s mandatory offer for its remaining stake in Odel. After the acquisition, Odel will undertake a 1-for-1 rights issue of shares to raise approximately SGD27.7m to fund the company’s development and expansion in Sri Lanka. The proposed acquisition and rights issue will be financed by PRA’s internally generated funds and is not subject to obtaining its shareholders’ approval.

Maintain BUY. The group’s proposed venture into Sri Lanka is part of PRA’s strategy to go beyond the Southeast Asian market to seek opportunities in countries with growth potential. This will allow PRA to establish a footprint in Sri Lanka as well as expand its department store chain to other parts of Asia. PRA said it does not intend to make major changes to Odel’s operations in the near term. Maintain BUY, with a FV of RM5.51, based on SOP valuation.


Source: OSK