TEXT-S&PBulletin: Aeon Acquisition Of Carrefour Malaysian Business

Fri Nov 2, 2012 1:15am EDT

(The following was released by the rating agency)

TOKYO (Standard & Poor's) Nov. 2, 2012--Standard & Poor's Ratings Services said on Nov. 1, 2012, that its ratings on Japan-based Aeon Co. Ltd. (A-/Negative/--) would not be immediately affected by the retail giant's announced acquisition of Carrefour S.A.'s (BBB/Stable/A-2) retail business in Malaysia.

In our view, the JPY15.1 billion (EUR147 million) acquisition cost is manageable for Aeon. We assess Aeon's financial risk profile to be weak for the current ratings, reducing the room it has to absorb additional and material increases in debt for the ratings. Nevertheless, the acquisition, including postacquisition costs, will have only a small impact on Aeon's financial risk profile, in our view.

We view the acquisition as positive for Aeon's business in countries of the Association of Southeast Asian Nations (ASEAN), where Aeon intends to aggressively expand its retail and credit card businesses. Aeon already has a solid business in Malaysia. Including the Carrefour purchase, Aeon's combined Malaysian business will be ranked second in that country's retail market, will have economies of scale, and is likely to have sufficient bargaining power to produce cost benefits in procurement in the next two to three years, in our view. In addition, Carrefour's hypermarket format will diversify Aeon's retail format in ASEAN markets--where it is focused on operating general merchandising stores, supermarkets, and shopping centers--to capture growing demand from lower- to upper-middle-class consumers in the region.


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