Livewire Equities

Woolworths (WOW) is preparing to submit a final bid for Li Ka-Shing's ParknShop, the second-largest grocery chain in Hong Kong, with about $US2.8 billion in sales and 345 stores. Last-round offers are due at the end of next week. Advised by Nomura, Woolworths is said to be willing to pay 15-16 times EBITDA, which would equate to a sale price of ~$US3 billion. If successful, ParknShop would be Woolworths' biggest acquisition, eclipsing the $2.5 billion purchase of Foodland's New Zealand grocery operations in 2005, and the $1.4 billion acquisition of ALH in 2004. Shareholders may be concerned about Woolworths' foray into the risky Asian markets, however, as Australian companies have had a bad track record operating in overseas jurisdictions. Furthermore, UBS analyst Ben Gilbert said Woolworths would probably need to raise equity to maintain its comfortable credit rating and draw down on debt facilities. (VIEW LINK)


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