American multinational retailer Wal-Mart is reported to be considering buying the ParknShop supermarket chain. The business is being sold by Hutchison Whampoa, which is controlled by billionaire tycoon Li Ka-shing.
Lis Hutchison Whampoa Ltd conglomerate has set an August 16 deadline for initial bids for ParknShop, which it values at as much as $4 billion, attracting interest from corporate and private equity buyers. ParknShop, which operates 345 stores in Hong Kong, mainland China and Macau, earned $2.8 billion in revenue last year, according to a recent statement from Hutchison. About 270 of the stores are located in Hong Kong.
Wal-Mart, the worlds largest retailer, is working with a bank as it weighs its options for ParknShop ahead of next weeks bid deadline, the people with knowledge of the matter said to Reuters. Wal-Mart declined to comment. The sources declined to be identified because the discussions are confidential.
Last year, Wal-Mart announced plans to open 100 new stores in China over the next three years and create 18,000 jobs in an effort to boost its mainland China business. Wal-Mart opened its first China store in 1996 and now operates over 380 stores, including Supercenters, Sams Clubs and Neighborhood Markets.
However, foreign retailers such as Wal-Mart have experienced problems to manage growth in China. Sun Art Retail Group Ltd, a joint venture between Taiwan conglomerate Ruentex Group and privately held by French retailer Groupe Auchan SA, is Chinas largest hypermarket chain.
Japans Aeon Co Ltd, China Resources Enterprise Ltd, Sun Art Retail, and Australian retailers Wesfarmers Ltd and Woolworths Ltd are among the eight parties invited to the process and weighing bids, according to Reuters.
The race of bidding is generating interest as it offers an opportunity to operate in a market that is dominated by two large players. Lis ParknShop and Singapores Dairy Farm International Ltd dominate Hong Kongs supermarket business. ParknShop has a 33.1% share and Dairy Farm has 39.8%, according to Euromonitor. Corporate buyers like Wal-Mart could use ParknShop as a way to expand operations into China.
Wal-Mart CEO Doug McMillion has said previously that expansion into new countries is not Wal-Marts main focus, as it is focused on making improvements to businesses in growing markets such as China and Brazil.
Wal-Mart shares retreated by 1.14% yesterday while being up more than 13% this year.
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