THE BUZZ
Last week, the Nikkei said Japanese retailer Aeon Co (AEON Japan) is set to acquire France-based Carrefour's Malaysian business for slightly more than JPY20bn yen (USD250m) as part of the group’s push into South-east Asia.
Not the first time. It would appear that M&A activities in the consumer space are still pretty vibrant as this is the second time the media has reported that AEON Japan is in talks to buy Carrefour’s Malaysian business. In a statement last month, AEON Japan had poured cold water on such speculation, saying that ‘there is absolutely no truth to the report”.
Wider network and clientele for AEON. The deal, which is expected to be completed within the next few weeks, will make AEON Japan the No.1 supermarket operator and one of the largest retailers in Malaysia. We believe that should the deal go through, the business acquired is likely to be placed under the wings of AEON Co. (M), or AEON Malaysia. The acquisition will benefit the company as it will broaden the group’s market since AEON is a department store targeting the middle-income group while Carrefour which is a hypermarket operator catering to the low-to-mid income consumers. The only drawback might be the possibility of cannibalization with regard to AEON’s four existing MaxValu stores, which are its value-for-money standalone stores.
Fund raising needed if deal is on. The deal is estimated to cost around USD250m, or approximately RM750m. Given AEON Malaysia’s current net cash position of RM264m as of June 2012, the group will need to finance the buyout either with debt or equity-raising should the acquisition be made at the AEON Malaysia level. Assuming the company will resort to financing via with debt, it will end up with a net gearing of 35.3% versus the current net cash position.
Maintain NEUTRAL. Since there is no material announcement on this matter, we are leaving our forecasts unchanged. Maintain NEUTRAL, with a new FV of RM10.28, as we roll over our valuation from FY12 to FY13 EPS.
Source: OSK
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