Modern Internasional - Charoen Pokphand Indonesia Deal Off Table
Charoen Pokphand Indonesia, the largest producer of poultry feed, day old chicks and processed chickens in Indonesia, will not acquire convenience store (franchise) 7-Eleven from Modern Putra Indonesia, a subsidiary of Modern Internasional. On Monday (05/06) Modern Internasional said it had scrapped the deal while both parties had earlier signed a business acquisition agreement, in April 2017, regarding the sale of the 7-Eleven franchise for IDR 1 trillion (approx. $75.2 million).
Modern Internasional said the deal broke down because several parties could not reach an agreement about the deal that was supposed to be completed in late June 2017. The company's extraordinary general shareholder meeting that was scheduled for 21 June 2017 has also been cancelled.
Shares of Modern Internasional plunged 12.07 percent to IDR 51 a piece after the deal was scrapped, while shares of Charoen Pokphand Indonesia only fell 0.32 percent to IDR 3,110 per share on Monday's trading day.
Stock Quote Modern Internasional - MDRN:
Charoen Pokphand Indonesia - CPIN:
Modern Internasional's shares are under serious pressure because the 7-Eleven business segment forms a big loss for the company. In 2016 Modern Internasional already shut down 25 under-performing 7-Eleven stores, hence per September 2016 there are 175 7-Eleven outlets in Indonesia (mainly in the Greater Jakarta region). The 7-Eleven stores struggle to compete with other convenience stores (specifically industry leaders Indomaret and Alfamart), while 7-Eleven's ready-to-eat snacks and drinks segment struggles to compete with the many local food vendors on the streets of the bigger Indonesian cities.
Meanwhile, Indonesia's ban on sales of alcohol in the nation's smaller retail stores was another setback for 7-Eleven. Through Trade Regulation No. 06/M-DAG/PER/1/2015 on the Control and Supervision of Procurement, Distribution, and Sale of Alcoholic Beverages the Indonesian government imposed this ban in April 2015, hence making it much more difficult for consumers to purchase light alcoholic beverages. Sales of alcohol contributed about 10 percent of total sales of 7-Eleven stores.
Read also: Government Reregulates Minimarkets & Convenience Stores in Indonesia?
Charoen Pokphand Indonesia is an affiliate of Thai conglomerate Charoen Pokphand Group that operates the 7-Eleven trademark in Thailand (with more than 9,500 outlets). The company earlier planned to acquire the 7-Eleven brand in Indonesia and introduce a new concept to the stores that would turn them into a success.
Overview Minimarkets & Convenience Stores in Indonesia:
| Outlet Number |
|
| Indomaret | 13,900 |
| Alfamart | 11,115 |
| Alfamidi | 1,143 |
| 7-Eleven | 175 |
| Convenience Stores | ±500 |
| Minimarkets | ±28,000 |
Source: Bisnis Indonesia