PETALING JAYA: A private equity (PE) fund managed by CIMB Private Equity (CIMB PE) and Mitsubishi Corp is believed to have won the bid to take over local supermarket chain Jaya Grocer.

It is believed that the joint venture (JV) had paid about RM300mil for the grocery chain, valuing the entity at more than 30 times the price-earnings ratio (PER) for this year, according to sources.

“In terms of earnings multiple valuation, the deal appears to be on the high side. But the grocery store industry generates the highest free cash flow within the retail sector,” said an analyst.

The JV is believed to have used a PE fund known as the Asean Industrial Growth Fund (AIGF), which was set up five years ago with an initial fund size of US$130mil (RM527mil), to acquire the grocery chain. It is a South-East Asia-focused PE fund with investors mainly from Japan.

Development Bank of Japan Inc is also reportedly a member of the partnership.

Sources said that the PE fund bought the entire 100% stake in Jaya Grocer, which involves 16 outlets of supermarket stores.

“The valuation for the deal was more than 30 times the forecast PER for the financial year 2016 (FY16) ,” a source said.

The source added that the Jaya Grocer deal was the first acquisition by AIGF.

CIMB Group Holdings Bhd declined to comment on StarBiz’s queries.

The sale of Jaya Grocer began last year with a lower initial price tag of RM200mil.

Sources said Jaya Grocer, which is owned by Trendcell Sdn Bhd, posted an earnings before interest, tax, depreciation and amortisation (Ebitda) of RM18mil in FY15.

Based on Trendcell’s accounts obtained by StarBiz, the company reported a profit after tax of RM1.05mil on the back of a revenue of RM283.08mil for its FY14 ended June 30. This gives it a profit after tax margin of a mere 0.37%. The company has total assets of RM77.87mil.

Among the other PE firms that were in the bidding process were TPG Growth and Creador.

It is learnt that the sale was conducted via an open bid process by Deloitte on behalf of Jaya Grocer.

Jaya Grocer started in 2007 with its first outlet in Jaya 33 in Petaling Jaya. It has 16 outlets located mainly in the Klang Valley including The Intermark, Empire Shopping Gallery and KLIA2.

Jaya Grocer was set up by the Teng family, who are the founding family of Giant Hypermarket and the TMC (Teng MiniMarket Centre) in Bangsar.

The family sold the Giant chain to Hong Kong-based Dairy Farm group in 1999 for an undisclosed sum. Meanwhile, TMC Store Bangsar has been wholly owned and operated by GCH Retail (Malaysia) Sdn Bhd since November 1980.

The Teng family also runs Pasaraya Hero, which it started in 2010. It is unclear if the current sale process includes these supermarkets.

PE firms have been displaying a strong interest in consumer-related businesses.

Navis, for example, had invested in Village Grocer (a competitor of Jaya Grocer) and the Big Group (that runs Ben’s Independent Grocer) and is said to be in talks to buy the Oriental Group of restaurants, a Malaysian-Chinese fine-dining group.

Source : thestar.com.my

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