French hypermarket operator Carrefour SA is exploring a sale of its China and Taiwan businesses that would involve either an initial public offering in Hong Kong or putting some of those assets in a tie-up with another company, according to people familiar with the matter.
The IPO route could have a fund raising size of roughly US$1 billion, one of the people said, adding Carrefour's plans are still at a preliminary stage. The plan is to find a sustainable future for its China and Taiwan business, which jointly make up the bulk of its Asian operations, but face headwinds from competitors. Carrefour has been pulling back from markets it doesn't dominate in or don't have critical mass in, while focusing on its home market, France.
While Carrefour's China operations account for the bulk of its Asian businesses, it doesn't lead as a hypermarket operator in the mainland's intensely competitive retail scene. Carrefour, which currently operates 220 hypermarkets in China, was the fourth largest player in the country with a 6.9% market share last year, well behind market leader Sun Art Retail Group Ltd., a French-Chinese joint venture, with a 13.6% share of the market, according to data from Euromonitor. Six years ago, it was the third-largest player in the country, with a 9.1% market share.
Carrefour is the market leader in Taiwan, with a 48.1% market share last year in the island last year, according to Euromonitor.
Carrefour has already exited a number of countries in Asia over the past few years, including Japan, South Korea, Indonesia and Malaysia. France made up 45% of the company's revenue in the first quarter of this year.
Carrefour's China hypermarkets account for around 77% of its Asia sales, which came to EUR6.4 billion last year or around 8 percent of group sales. The company's Asian operating margins - a profitability ratio showing operating income as a percentage of sales - was 2.6% last year, compared with 3.5% in 2011.
