Charoen Pokphand Group, Thailand’s largest conglomerate, has sealed a deal with 9 financial institutions to undertake a $10.6 billion acquisition of TESCO’s operations in South East Asia, totaling some 1,965 stores in Thailand and Malaysia.
The deal, which was finalized at the end of April, saw 9 financial institutions from across the world offer facilities to CP Group to undertake what is so far the single biggest acquisition deal in the world in 2020.
The $10.6 billion deal by CP Group to buy out the Thai and Malaysian operations of TESCO went ahead despite many financial institutions pulling out of the deal due to the ongoing coronavirus pandemic and the need for liquidity.
The deal has not been a smooth ride for CP Group after as many as 9 financial institutions that had made commitments to the group for the deal backed out at the last minute.
Sources in the banking industry said that among the local banks to back out of the deal was Bank of Ayudhaya (BAY) while other banks to back out were from United Kingdom, the country where TESCO is located. Among the banks that pulled out were:
- United Kingdom and Hong Kong-based Standard Chartered Bank
- United Kingdom and Hong Kong-based HSBC
- Singapore based DBS
- Australian based ANZ
- Bank of China (BOC)
- China-based ICBC
- Japan-based SMBC
- France-based NATIXIS
- Bank of Ayudhaya
Sources in the banking industry said that BAY/BOC/ICBC & SMBC had pledged up to $1.8 billion, while both HSBC and Standard Chartered bank had committed $1 billion each but all reportedly backed out.
The deal was eventually led by the UBS and JP Morgan with 2 Singaporean banks, 2 Chinese banks, 1 Malaysian, 1 French, 1 Dutch and 1 Japanese bank which took the foreign tranche of the deal while 2 Thai banks took on the local tranche.
Allocations for the US dollar trance are:
CP Group’s listed subsidiary CP All Plc took a total of US$3.19 billion 12-month from tranche A, while a special purpose vehicle is the borrower of US$4 billion from Tranche B.
The special purpose vehicle is also the acquiring entity for CP Group’s deal.
Reports from Refinitive, a newswire service, suggest that the opening interest margin for both tranches is 150 basis points over and above LIBOR before a step-up kicks in after 6-months from signing.
The success of the deal means that the Lotus Hypermarket chain would return to CP Group’s fold after it had been forced to sell out to TESCO group at the height of the Asian Financial Crisis in 1997/1998.
There were fears that the deal would not be successful due to the coronavirus pandemic. Beyond problems with lenders, one of the chief deal makers – Pakpoom Vallisuta, chairman of the Quant Group and a financial adviser for CP Group, passed away on April 1st after being infected by the virus while undertaking the deal in London.
Even though the total amount of funds raised is just $7.2 billion, CP will have strategic partners in helping see through the deal while the rest of the funds will come through the family and other cash flow sources.
