Woolworths has not ruled out a bid to acquire Hong Kong grocery chain ParknShop, with Asian investors tipped to help the Australian retail giant bankroll the buyout, according to media reports.
On Thursday (17 October), the Australian Financial Review revealed Woolworths was likely to submit a final bid for ParknShop within the next week, believed to be in the vicinity of US$3bn.
Woolworths has refused to comment on the report, neither confirming nor denying its interest in the acquisition, which would signal its first move offshore since the purchase of Foodland’s New Zealand assets in 2005.
BT Investment Management's Sondal Bensan said Woolworths might look to borrow capital from Asia to create a natural hedge, reducing currency risk, and allowing it to pay more than rival suitors, which include Japan’s Aeon Group and Thailand’s Charoen Pokphand Group.
“If it were to be funded with low-cost Asian debt you'd most likely see an underwritten dividend reinvestment plan put in place – the economics could stack up better and Woolworths could also justify paying more for the acquisition,” Bensan told the Financial Review.
Aberdeen Asset Management senior investment manager, Andrew Preston, said Woolworths’s high share price might also be used to raise capital.
“If they can get it for a reasonable price and use equity to buy it that's the best way to do it because they're quite highly rated at the moment,” Preston said.
ParknShop operates 345 outlets throughout Hong Kong, Macau and southern China, with the grocery chain holding a 19 per cent share of Hong Kong’s fresh-food and consumer goods market. Hutchison Whampoa launched the sale of ParknShop in June.
