Lotte Eyes $1b Deal to Acquire Matahari

by S.K. Zainuddin

Jakarta. Indonesia’s increa..." /> Lotte Eyes $1b Deal to Acquire Matahari

by S.K. Zainuddin

Jakarta. Indonesia’s increa...">
Lotte Eyes $1b Deal to Acquire Matahari

by S.K. Zainuddin

Jakarta. Indonesia’s increasingly attractive consumer market is again proving tempting, with South Korea’s Lotte Group making a bid for the hypermarket and supermarket businesses of Matahari Putra Prima in a deal that is said to be worth close to $1 billion.

The South Korean retail giant said it had submitted a bid for Matahari, but spokesman Park Sang Sub declined to give details on the size of the offer.

Matahari shares were up 4.8 percent to Rp 1,500 on Tuesday on the news of the potential sale, which was first reported by Reuters.

The Carlyle private equity firm was also in the race for Matahari, Reuters reported.

A Matahari director told the Jakarta Globe that the management was unaware of the news coming out of Singapore and was therefore unable to comment.

“We have however instructed Merrill Lynch to explore investment opportunities outside of Indonesia and to advise on what is best for the shareholders, but so far nothing concrete has emerged,” they added.

Economists and market analysts say it is clear Indonesian consumers are proving highly attractive, with per-capita income inching close to $3,000.

With a young and productive population, Indonesia’s demographics are also more attractive than China’s, even though China has a population more than five times as large.

Indonesia’s rising middle class, estimated at 30 million currently and expected to double in the next 10 years, is also proving to be a magnet for foreign and domestic retailers.

Growth in consumption has further been underpinned by macroeconomic stability and large inflows of foreign investment.

“We have a fiscal posture that other nations are dying for,” Gita Wirjawan, chairman of the Investment Coordinating Board (BKPM), told the Jakarta Globe.

“Our debt to GDP ratio has diminished from a high of 80 percent five years ago to 26 percent, and will fall to 23 percent by 2014.”

He added that foreign direct investment could hit $20 billion this year, with South Korean firms among the most bullish on Indonesia.

Given this backdrop, the country’s retail sector has been particularly attractive for investors.

Lippo Group has been one of the few Indonesian conglomerates willing to sell assets to foreign investors.

In January, it sold its controlling stake in Matahari Department Store to CVC Capital Partners for $773 million as part of a deal that netted the group more than $1 billion.

Lippo has built its hypermarket business into one of the fastest growing in the country, with annual sales of more than $1 billion.

Matahari’s Hypermart has 38 stores in 21 cities across the country, ranking it second behind market leader Carrefour Indonesia, which operates 65 stores.

Lotte, the fourth-biggest hypermarket player in Indonesia, is South Korea’s fifth-largest conglomerate in terms of assets.

In recent years, it actively snapped up M&A targets across Asia in the face of an increasingly saturated retail market at home.

Lotte bought Chinese supermarket operator Times in December and now operates 79 stores throughout that country. In Indonesia, Lotte purchased Dutch wholesaler Makro in October 2008 for about $350 million.

“Following the acquisition of Makro, Lotte has established itself well in Indonesia, and its pursuit of Matahari is a sign it wants to root itself more firmly in the country,” said Ahn Ji-young, an analyst at IBK Securities.

“Rather than expanding in terms of country profile, Lotte wants to strengthen and focus more of its operations in countries where it is already doing well, such as Indonesia and China.”

Kelvin Long, director of equities at Samuel Sekuritas Indonesia, said the Matahari deal would help to encourage more foreign money to flow in.

“This is a fantastic asset that will fetch a high price,” he said.

The Jakarta Globe is affiliated with the Lippo Group.



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RECENT COMMENTS

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@oleleho: You make a good point, but what you consider to be an "unacceptable act" is only your opinion. In Bali recently, I saw a whole village

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Copyright
<span style="font-size: 14pt"><span style="font-weight: bold">Lotte Eyes $1b Deal to Acquire Matahari</span></span><br /> <br /> by S.K. Zainuddin<br /> <br /> Jakarta. Indonesia&rsquo;s increasingly attractive consumer market is again proving tempting, with South Korea&rsquo;s Lotte Group making a bid for the hypermarket and supermarket businesses of Matahari Putra Prima in a deal that is said to be worth close to $1 billion.<br /> <br /> The South Korean retail giant said it had submitted a bid for Matahari, but spokesman Park Sang Sub declined to give details on the size of the offer.<br /> <br /> Matahari shares were up 4.8 percent to Rp 1,500 on Tuesday on the news of the potential sale, which was first reported by Reuters.<br /> <br /> The Carlyle private equity firm was also in the race for Matahari, Reuters reported.<br /> <br /> A Matahari director told the Jakarta Globe that the management was unaware of the news coming out of Singapore and was therefore unable to comment.<br /> <br /> &ldquo;We have however instructed Merrill Lynch to explore investment opportunities outside of Indonesia and to advise on what is best for the shareholders, but so far nothing concrete has emerged,&rdquo; they added.<br /> <br /> Economists and market analysts say it is clear Indonesian consumers are proving highly attractive, with per-capita income inching close to $3,000.<br /> <br /> With a young and productive population, Indonesia&rsquo;s demographics are also more attractive than China&rsquo;s, even though China has a population more than five times as large.<br /> <br /> Indonesia&rsquo;s rising middle class, estimated at 30 million currently and expected to double in the next 10 years, is also proving to be a magnet for foreign and domestic retailers.<br /> <br /> Growth in consumption has further been underpinned by macroeconomic stability and large inflows of foreign investment.<br /> <br /> &ldquo;We have a fiscal posture that other nations are dying for,&rdquo; Gita Wirjawan, chairman of the Investment Coordinating Board (BKPM), told the Jakarta Globe.<br /> <br /> &ldquo;Our debt to GDP ratio has diminished from a high of 80 percent five years ago to 26 percent, and will fall to 23 percent by 2014.&rdquo;<br /> <br /> He added that foreign direct investment could hit $20 billion this year, with South Korean firms among the most bullish on Indonesia.<br /> <br /> Given this backdrop, the country&rsquo;s retail sector has been particularly attractive for investors.<br /> <br /> Lippo Group has been one of the few Indonesian conglomerates willing to sell assets to foreign investors.<br /> <br /> In January, it sold its controlling stake in Matahari Department Store to CVC Capital Partners for $773 million as part of a deal that netted the group more than $1 billion.<br /> <br /> Lippo has built its hypermarket business into one of the fastest growing in the country, with annual sales of more than $1 billion.<br /> <br /> Matahari&rsquo;s Hypermart has 38 stores in 21 cities across the country, ranking it second behind market leader Carrefour Indonesia, which operates 65 stores.<br /> <br /> Lotte, the fourth-biggest hypermarket player in Indonesia, is South Korea&rsquo;s fifth-largest conglomerate in terms of assets.<br /> <br /> In recent years, it actively snapped up M&amp;A targets across Asia in the face of an increasingly saturated retail market at home.<br /> <br /> Lotte bought Chinese supermarket operator Times in December and now operates 79 stores throughout that country. 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So far you and your FPI thugs have only created violence everywhere. We<br /> <br /> 8:19am | Indonesian Police General Blam...<br /> just when yu think the could no be a stupider comment, along comes Nanan to save the day.,,,,let me get this right. Police are supposed to uphold a<br /> <br /> 7:57am | Indonesian Lawmakers Fly Coop ...<br /> Typical selfish attitude that we have come to expect<br /> <br /> 7:54am | Indonesian Police General Blam...<br /> The Indonesian police force is corrupt to the core; that is a simple fact that no reasoning such as this can change. However, the Indonesian<br /> <br /> 7:51am | Indonesian Police General Blam...<br /> An honest confession that the police has failed to enforce the law. Time to stop paying them good tax money.<br /> <br /> 7:48am | Indonesian Police General Blam...<br /> The truth is that the public receives only very sparse service and is actually treated like not existing if there is no extra &quot;donation&quot; involved<br /> <br /> 7:42am | FPI Snubs Playboy Model Pamela...<br /> @BlueJoe - I actually think it is rather the rancid remark of the FPI who brought the charity of Anderson into the spotlight in the first place...<br /> Copyright
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