Japan's Aeon Co Ltd and State-owned China Resources Enterprise Ltd are among the suitors considering bids for the Hong Kong supermarket business being sold by billionaire Li Ka-shing, sources familiar with the matter told Reuters.
Li's Hutchison Whampoa Ltd conglomerate has set an August 16 deadline for initial bids for the business, with an asking price of up to $4 billion, said the sources, who declined to be identified because the sale process is confidential.
The auction is generating interest from companies and private equity firms, lured by the opportunity to operate in a market that is dominated by two large players. Octogenarian Li is planning to sell the business to focus more on Hutchison's health and beauty retail operations, which have a bigger global footprint and offer higher margins compared with the supermarket business, the sources said.
China's Sun Art Retail Group Ltd and Australian retailers Woolworths Ltd and Wesfarmers Ltd are among the other suitors evaluating bids, the sources added.
"Hong Kong is a saturated market and we can only expect very stable or even flat growth in the supermarket business, which may not be attractive to investors seeking speedy returns," said Linus Yip, chief strategist at First Shanghai Securities.
"But foreign operators may find it appealing if they want to tap the China market through ParknShop as a stepping stone," Yip said.
Li's ParknShop and Singapore's Dairy Farm International Ltd dominate Hong Kong's supermarket business. ParknShop has a 33.1 percent share and Dairy Farm has 39.8 percent, according to London-based Euromonitor. China Resources' Vanguard Supermarket has a 7.8 percent market share.
ParknShop, which operates 345 stores in Hong Kong, the Chinese mainland and Macao, earned HK$21.7 billion ($2.8 billion) in revenue last year, according to the statement issued by Hutchison. About 270 of the stores are in Hong Kong.
Thailand's CP All Pcl has decided not to bid for the business with Hong Kong's high real estate prices seen as a sticking point, a source said.