A report from UBS indicates that Jardine Matheson is reportedly in discussions with CKH HOLDINGS (00001) regarding the acquisition of its PARKnSHOP supermarket business, with plans to merge it with Wellcome, which operates under Jardine's DFI Retail Group. The bank estimates that, based on a peer enterprise value multiple (EV/EBITDA) of approximately 9 times, PARKnSHOP could be valued between $200 million and $300 million. For CKH HOLDINGS, the "Other Retail" segment, which includes PARKnSHOP, contributed only HK$167 million in EBITDA last year, accounting for less than 1% of the total retail business EBITDA. This suggests that divesting the business would have a limited effect on the company's overall earnings or valuation. UBS currently assigns CKH HOLDINGS a target price of HK$67 and a "Buy" rating. The bank views this potential transaction as a market consolidation opportunity for DFI Retail, enabling it to gain market share and achieve cost synergies through increased scale. The move also aligns with DFI Retail and Jardine's existing merger and acquisition strategy. Financially, as of the end of last year, DFI Retail held $70 million in net cash and targets a debt ratio below 25%. Combined with an annual strategic M&A budget of approximately $100 million, UBS believes DFI Retail's balance sheet is strong enough to execute the transaction.
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