Its Thai unit to offer 1.77b shares at between 9.65 and 10.4 baht apiece
(BANGKOK) Tesco’s Thai unit plans to raise as much as 18.4 billion baht (S$749 million) from the sale of a fund that will buy shopping malls owned by the retailer, in what may be Thailand’s biggest initial public offering since 2006.
|Rolling on: The fund will use the proceeds to buy 17 malls anchored by Tesco Lotus stores from the retailer|
Ek-Chai Distribution System Co, controlled by the UK’s largest retailer, will offer 1.77 billion shares in the Tesco Lotus Retail Growth Freehold and Leasehold Property Fund at between 9.65 baht and 10.4 baht apiece, according to a presentation distributed by Ek-Chai yesterday.
The fund will use the proceeds to buy 17 malls anchored by Tesco Lotus stores from the retailer. It will earn revenue by leasing the stores back to Tesco and expects to pay a total distribution of 6.5-7 per cent each year, according to the statement.
Cheshunt, England- based Tesco has been selling and leasing back its outlets since 2004.
‘This property fund will offer investors a way to capitalise on the growth of the Thai economy and retail sector,’ said Christopher Bush, chief executive officer of Ek-Chai at a press conference in Bangkok. ‘We have a very strong pipeline of good assets that we can inject into the fund in the future.’
Tesco generated US$2.5 billion in sales from Thailand in the six months through August, making the country its third-largest revenue source after the UK and South Korea.
The company operates more than 900 stores, of which 133 are hypermarkets, and employs about 38,000 people in the country, Ek-Chai said.
Tesco holds 86 per cent of the voting rights in Ek-Chai, according to its annual report. Six of the 17 properties to be purchased by the fund are in Bangkok, three in tourist destinations that the retailer didn’t name, and eight in ‘burgeoning cities with growing disposable income’, according to the statement.
‘The outlook for the retail sector is pretty good this year as the situation has returned to normal after last year’s flood crisis.’ said Preeyanun Tripetchchuporn, an analyst at Phillip Securities in Bangkok. ‘People will start spending again, boosted by promotions by many shopping centres.’
If Tesco raises the maximum amount sought, the IPO will be Thailand’s biggest since Rayong Refinery raised 25.2 billion baht in May 2006. Tesco expects to inject an additional two assets into the property fund before the end of fiscal 2012/2013, and plans to add at least one to two assets to the fund annually, according to the statement.
Phatra Securities will manage the sale in Thailand, and Bank of America Merrill Lynch, Nomura Holdings and Royal Bank of Scotland will help sell shares to overseas investors, Ek-Chai said.
Krung Thai Asset Management, a unit of Krung Thai Bank, will manage the property fund. Ek-Chai will set the price of the units on March 5, it said. — Bloomberg
Source: Business Times 21 Feb 2012