(Corrects valuation figure in paragraph 7 to 28-34 times)
* CRE emerging as frontrunner to win the auction
* Woolworths CEO cautious of overseas acquisitions
* With win, CRE may control 50 pct of HK supermarket sector
By Denny Thomas and Stephen Aldred
HONG KONG, Aug 28 Private-equity bidders for
Hutchison Whampoa Ltd's Hong Kong supermarket chain
ParknShop were dropped from the auction amid signs strategic
buyers like China Resources Enterprise (CRE) had the upper hand
in a sale expected to fetch between $3-4 billion.
KKR & Co and TPG Capital Management LP were
told that they were out of the running to buy ParknShop, people
close to the matter told Reuters, after their offers failed to
meet the company's expectations.
The exit of private equity firms leaves China's state-owned
CRE, Japan's Aeon Co Ltd and Australia's
Woolworths Ltd among the suitors left in the auction.
Officials at Hutchison, KKR and CRE declined to comment. TPG
officials did not comment.
Some analysts say beer-to-retail conglomerate CRE, with its
existing foothold in Hong Kong through its China Resources
Vanguard unit and its recent joint venture with British retailer
Tesco plc, is emerging as the frontrunner to win the
"For CRE it makes strategic sense to expand in Hong Kong,
but they should be mindful of not paying too high a multiple,"
said Steve Chow, an analyst with Sunwah Kingsway Research.
Chow said a reasonable price-to-earnings multiple for
ParknShop is in the mid-20s. CRE itself trades at a 12-month
forward price-to-earnings multiple of 24.2, according to Thomson
Reuters data, while Hutchison's expected price tag represents a
P/E of 28-34, a person familiar with the process previously told
The highest private equity offer was around HK$20 billion
($2.6 billion), one of the people said.
A successful bid would have CRE controlling more than half
of Hong Kong's $6.6 billion supermarket industry.
On Wednesday, the CEO of Australia's largest supermarket
chain, Woolworths declined to specifically comment on ParknShop,
but said the company would be cautious on acquisitions.
"In fact we've said in 2011 international expansion is part
of our consideration for our future growth. We never speculate
on what we will be looking at. This is something we are very
cautious about," CEO Grant O'Brien told reporters in a phone
Hutchison, controlled by Asia's richest man, Li Ka-shing,
received at least seven offers in the first round of bidding in
mid-August. Hutchison launched a strategic view of the business,
though it remains unclear if it would end up selling the
business or retain it..
Established in 1973, ParknShop held a 40 percent share of
the Hong Kong market for supermarkets for the year to June,
according to Nielsen Homescan, with Dairy Farm at 33 percent.
ParknShop generated HK$21.7 billion in revenue last year and
earnings before interest, tax, depreciation and amortisation of
HK$1.4 billion, another person familiar with the matter has
previously told Reuters.
($1 = 7.7556 Hong Kong dollars)
(Additional reporting by Maggie Lu and Donny Kwok; Editing by
Michael Flaherty and Matt Driskill)