On Friday at 11:05 AM (Bangkok time), the share price of CP ALL Public Company Limited (SET: CPALL) slumped by 3.98% or THB 2.25 to THB 54.25, with a trading value of THB 3.22 billion.
Following the report from Japanese media that Japan’s Seven & i founding family is reportedly seeking Thailand’s Charoen Pokphand (CP) Group to participate in a management buyout of the Japanese retail giant at a value beyond $47 billion offered by another bidder, Couche-Tard.
Liberator Securities stated that Seven & i’s profits in Japan are relatively low, with a Price-to-Earnings (PE) ratio of 80x or a Forward PE of 50x, compared to CPALL’s current PE of 20x. This raised concerns that the deal may not be beneficial for CPALL, as it would result in a meager 2% return against a 4% cost, with Net Debt to Equity at 0.8x, indicating a relatively high level of debt.
If the deal materializes, it is anticipated to have a more adverse impact on CPALL. The analyst stated that it would be more favorable for the company if it concentrates on its operations in Thailand with 600-700 branches.
Kiatnakin Phatra Securities (KKPS) wrote in a short note, stating that based on preliminary discussions with the company, CP Group is likely uninterested in participating in a Management Buyout (MBO) for two primary reasons: (1) most of the infrastructure and products are developed by CPALL, and (2) any new owner (if any) must respect existing agreements unless a joint agreement is reached.
Nonetheless, this situation might become an overhang on CPALL’s stock price if CP Group decides to join the MBO, depending on how much more they would need to pay above Couche-Tard’s offer of US$14.86 per share.
Sensitivity Analysis: At an interest rate of 4% for the borrowed funds, for every 10% premium over US$14.86 per share for 1% of Seven & i’s shares, CPALL could incur a loss of approximately 50-100 million baht, equating to about 0.3-0.5% of KKPS’ 2025 earnings projections.
