TCC Group led by billionaire Charoen Sirivadhanabhakdi has assigned subsidiary Berli Jucker Plc (BJC) to buy a 58.56% stake in Big C Supercenter Plc from France-based Casino Group and borrow 220 billion baht to finance the acquisition.
BJC told the Stock Exchange of Thailand (SET) that its board approved the company buying the stake both directly and indirectly from Geant International BV.
The purchase will cost about 122 billion baht or 252.88 baht a share.
BJC will make a tender offer for the remaining 41.44% of Big C shares at a price no higher than 252.88 baht.
Big C on Monday announced major shareholder Geant International had agreed to sell its stake to TCC Group.
BJC shares on Friday fell 1.75 baht or 5% to close at 33.25 baht after the announcement, which included an option of a capital increase.
It will also buy a 60% stake in C-Distribution Asia Pte from Cdiscount International BV, part of Geant International's group, for 856 million baht.
BJC's board also approved taking out a 220-billion-baht bridge loan with a maturity of less than 12 months largely to finance the purchase of the 58.56% stake in Big C and the tender offer for the remaining stakes in the hypermarket chain.
The board may consider recapitalisation to repay the bridge loan.
BJC said its acquisition was not a back-door listing, as Big C's retail business would complement its manufacturing and distribution business.
"We have no plans to change our core business," BJC director Aswin Techajareonvikul said. "Big C will continue to be a listed company."
Maybank Kim Eng Securities (Thailand) and JayDee Partners are BJC's financial advisers.
An industry source said BJC would benefit from having a big nationwide retail store network to sell its products. It will also have increased bargaining power with suppliers.
"Its own distribution channel will draw more consumer product manufacturers to use BJC's trading services or hire BJC to produce products," the source said.
Big C has 125 large stores (Big C Supercenter, Extra and Jumbo), 55 Big C Markets, 394 Mini Big Cs and 146 Pure Drugstores.
BJC now has vast opportunities to make products under its house brand and sell them at Big C stores.
The source said BJC was just a subcontracted manufacturer making house brands for outsiders.
"The status of BJC as a trading company will be stronger, with its own distribution channel that can access a wider customer group," the source said.
Bualuang Securities research director Wikij Tirawanarat said BJC needed hefty recapitalisation to pay off the bridge loan, as its current equity was a meagre 18 billion baht.
However, he predicts only a portion of the remaining shares will be offered to BJC through the tender offer, as Central Group, another shareholder, will not divest its stake.
Following the takeover, BJC’s 2016 net profit will reach 5.9 billion baht, of which 3.5 billion will be contributed by Big C based on the 58.56% stake, Mr Wikij said.
Kavee Chukitkasem, assistant managing director of Kasikorn Securities, said synergy between BJC and Big C would be lower than that in the case of CP All Plc’s acquisition of Siam Makro Plc, as BJC’s sales revenue to be derived from Big C would not increase significantly.
"BJC's earnings per share may surge shortly after the merger but later slow, as the deal’s synergy is not significant," he said.
"However, we must consider the company’s plans following the merger."
Mr Kavee believes BJC’s interest burden of 6 billion baht a year from the bridge loan is not worrisome, as it can use Big C’s cash flow to pay interest costs and principal.
Big C recently reported its net profit declined to 6.9 billion baht last year from 7.23 billion in 2014.
Kriengkrai Tumnutud, head of investment strategy at AEC Securities, recommends investors shun investment in BJC until the deal is completed, as it must spend a massive amount for the acquisition and its debt-to-equity ratio will jump.
BJC shareholders will also face a dilution effect if the company decides to issue new shares, he said.
BIGC shares closed on Friday on the SET at 246 baht, unchanged, in trade worth 184 million baht.