According to a research report from Citigroup, the Financial Times reported last Friday (17th), citing informed sources, that Jardines, the parent company of DFI Retail Group, is in discussions with CKH HOLDINGS (00001) regarding the acquisition of the latter’s supermarket business, primarily ParknShop under the A.S. Watson Group. The acquired business could potentially be merged with DFI’s own supermarket operations in Hong Kong, principally Wellcome. Jardines/DFI declined to comment, while CKH HOLDINGS has not responded. Although Citigroup understands the strategic rationale behind this potential merger—creating the largest single supermarket chain in Hong Kong to better compete with both local and international rivals—the bank emphasizes that the deal faces significant risks related to feasibility and potentially prolonged execution time, given Hong Kong’s antitrust regulations and DFI management’s focus on return on investment and total shareholder returns. Regardless of whether the transaction proceeds, Citigroup’s investment thesis for DFI remains unchanged. The firm expects DFI Retail to report solid first-quarter results, with sales likely exceeding expectations, prompting a 30-day positive short-term outlook.
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