A Thai Billionaire Is Set to Reclaim a Lost Flagship Business. There May Be a Catch

(Bloomberg) -- Thai billionaire Dhanin Chearavanont often vowed that he would reclaim a lost flagship of his family’s business after being forced to divest its Lotus retail chain to Tesco Plc at the height of the Asian financial crisis in 1998.

Dhanin, who turns 81 next month, is about to fulfill that promise, after his Charoen Pokphand Group reached a $10.6 billion deal with the British retailer for a network of more than 2,000 hypermarket and grocery stores across Thailand and Malaysia. The outlets were renamed long ago to highlight the Tesco brand.

“This deal is about much more than just money, as Lotus was his baby,” said William Mellor, a co-author of the book “Dhanin Chearavanont: Roots & Vision,” referring to not only the original name but also the brand the group operates in China. “There was no way he was going to let any rival Thai company get in the way of that.”

Still, the patriarch, whose family was ranked the world’s 13th richest in a Bloomberg report in August, faces a challenge. He must convince the Thai antitrust agency to approve the deal, even though the CP Group already controls one of the world’s biggest 7-Eleven convenience-store chains and the domestic operations of cash-and-carry specialist Siam Makro Pcl.

If the Tesco acquisition goes through, the trio of retailers will have a combined annual revenue of about 695 billion baht ($22 billion), according to a report by Maybank Kim Eng Securities (Thailand) Pcl. That doesn’t include about $17 billion of sales in 2019 at Charoen Pokphand Foods Pcl, which is among the world’s largest animal feed, animal breeding and food processing businesses.

Years ago, Dhanin turned around the group’s fortunes that were squeezed by a regional crash set off by Thailand’s devaluation of the baht in July 1997. In the past decade, he’s overseen acquisitions and investments worth more than $32 billion at home and abroad, including the purchase for $9.4 billion of a stake in China’s Ping An Insurance (Group) Co. That deal in 2012 was the biggest-ever overseas investment by a Thai company, according to data compiled by Bloomberg, but is about to be topped by the one with Tesco.

“I was forced to sell my beloved baby, Lotus, to repay debt and save the entire group from bankruptcy during the financial crisis,” Dhanin said last week in an interview with the Standard, a Thai online news outlet. “I now have a capability to take it back and develop this baby into something much better.”

Enhancing Lotus

CP Group’s vast business networks such as meat production, technology and logistics will provide “great enhancements” to Lotus’s operations, according to Dhanin, who used the original name. He didn’t respond to a request for comments for this story, but was quoted by the Standard as saying that Thai regulators would clear the deal because the stores operate in a market segment that’s different from the group’s other retail units.

Dhanin’s individual net worth is $4.8 billion, according to the Bloomberg Billionaires Index.

“The deal will benefit the CP Group in the long term as the group has demonstrated with the acquisition of Siam Makro,” said Sasikorn Charoensuwan, head of research at Phillip Securities (Thailand) Pcl. “The key concern is the regulatory risk that could block the deal.”

CP Group wasn’t the only Thai group interested in Tesco’s operations. The group’s bid beat those of the TCC Group, controlled by Charoen Sirivadhanabhakdi, the nation’s richest person, and the Central Group, a retail conglomerate led by the Chirathivat family.

CP Group has hired JPMorgan Chase & Co., UBS Group AG and Siam Commercial Bank Pcl to arrange more than $7 billion of financing for the acquisition.

Walmart Inspiration

The reversal of fortune with Lotus is not the first for Dhanin. In 2013, CP Group bought majority control of Siam Makro from SHV Holdings NV for about $6.6 billion. The group was a founding partner of the cash-and-carry chain’s Thai unit, but divested in 2005 to help with debt repayment.

Dhanin founded Lotus Supercenter in 1994, inspired by Walmart Inc. stores in the U.S., he said. Four years later, he sold majority control to Tesco to protect CP Group from bankruptcy, he said.

Dhanin has always been fond of the Chinese word for “crisis” because its two characters can mean “risk” and “opportunity,” said Mellor.

--With assistance from Jeffrey Hernandez.

To contact the reporters on this story: Lee Miller in Bangkok at lmiller@bloomberg.net;Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editors responsible for this story: Sunil Jagtiani at sjagtiani@bloomberg.net, Lee Miller, Sam Nagarajan

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