PRIVATE equity (PE) fund-backed Trendcell Sdn Bhd’s attempt to sell its high-end grocery chain Jaya Grocer has hit a snag, prompting the owner to evaluate alternative options, including the possibility of a fresh selection process and floating Trendcell’s shares on the stock exchange.
This follows the retailer’s failure to obtain the desired offer from either US-based Carlyle Group Inc or Luxembourg-based CVC Capital Partners, according to sources. The Edge has learnt that Trendcell shareholders are seeking RM1.1 billion for its entire supermarket business, which rang up RM1.32 billion in sales last year.
Trendcell is wholly-owned by Jaya Grocer Holdings Sdn Bhd, which in turn is 45%-owned by Asean Industrial Growth Fund (AIGF). The remaining 55% stake is held by the grocery chain’s founder Teng Yew Huat. It is understood that AIGF, which had emerged as a shareholder in 2016 with a reported investment of RM300 million, wants to exit the business.
Details of what transpired remain sketchy, with one source saying the earlier selection process to find a suitor “had stalled” while another says it “will not be proceeding” and the owners are now mulling an initial public offering (IPO). Yew Huat did not respond to questions sent by The Edge.
Last month, The Edge reported that Carlyle and CVC had emerged as frontrunners in the race to acquire Trendcell and that the parties were negotiating a deal to buy either the entire business or a portion of it.
Carlyle, which manages US$246 billion (RM1 trillion) in assets under management, and CVC, with US$117.8 billion of assets, are believed to have been picked over at least two other offers — from Malaysian PE fund Creador and Japanese retailer AEON Co Ltd.
“Valuations have fallen short of AIGF’s expectations. Both AIGF and Yew Huat are now looking at an IPO option,” a source tells The Edge, adding that if the retailer decided on the IPO route, CIMB Investment Bank Bhd is likely to be appointed to handle the listing exercise.
It is worth noting that CIMB Private Equity Sdn Bhd holds a 45% stake in AIGF, while Mitsubishi Corp and Development Bank of Japan own 45% and 10% respectively.
Sources say Trendcell may also conduct another bidding process to invite offers. It had hired Deloitte Corporate Finance to handle the sell-side process.
Why the IPO route? An investment banker, who declined to be named, says the recent strong performance of companies on the stock market, following their maiden listing, may have motivated Trendcell to consider going public as an exit alternative. For instance, shares in Mr DIY Group (M) Bhd, which was listed on Oct 26 last year, have risen 149% from their IPO price of RM1.60 to close at RM3.98 last Thursday. The share price of Optimax Holdings Bhd, which was listed on Aug 18, is up 383% from its IPO price of 30 sen, closing at RM1.45 last Thursday.
Grocers have generally been performing well despite the Covid-19 pandemic. Companies Commission of Malaysia (SSM) data shows that Trendcell’s net profit surged 144% to RM67.04 million in the financial year ended June 30, 2020 (FY2020) from RM27.49 million in FY2019. This was achieved on the back of a 41.4% year-on-year growth in revenue to RM1.32 billion, from RM933.48 million.
As at June 30, 2020, the total liabilities of the supermarket chain stood at RM311.89 million, of which RM233.8 million was current. It also has accumulated profits of RM82.08 million.
The directors of Trendcell are Yew Huat, Daniel Teng Tu Yoong, Anthony Tu King, Daniel Yong Teck Seong and Tetsuro Ono.
The shareholders of Jaya Grocer Holdings are Yew Huat (55%) and Timbang Perkasa Sdn Bhd (45%). Tu Yoong and Nor Samsiah Abdullah Din own one share each. All but one share in Timbang Perkasa is held by Acme (M) Holdings Pte Ltd. The one share is held by Zaidaton Akmah Yeop. Acme Malaysia is wholly-owned by AIGF Fund Co Pte Ltd, which in turn is owned by AIGF LP, a company incorporated in the Cayman Islands.
Jaya Grocer was founded in 2007 by the Teng family with the aim of establishing a premium supermarket brand. Yew Huat’s father, Teng Sek How, opened his first sundry shop in 1944 in Jalan Sentul, Kuala Lumpur, and, later, Yew Huat and his brothers opened the well-known Teng Minimarket Centre, popularly known as TMC, in Lucky Garden, Bangsar. The family also founded the Giant grocery store. TMC and the Giant chain were later sold to Hong Kong’s Dairy Farm International Holdings Ltd.
The first Jaya Grocer outlet opened in Jaya 33 in Petaling Jaya, Selangor. Today, there are about 40 stores across the country.
Meanwhile, a recent transaction involving a grocer is TF Value-Mart. Last December, Singapore-based PE firm KV Asia Capital Pte Ltd exited from TF Value-Mart, a popular hypermarket chain operating in secondary towns that reported a revenue of RM1.48 billion in 2019. The sale was done via a management buyout, assisted by financing from Intermediate Capital Group plc, which both funded the buyout and acquired a stake in the hypermarket operator via its Asia Fund IV. The deal was reportedly done at RM850 million.