Taiwan FamilyMart Co (全家便利商店), the nation’s second-largest convenience store operator, could acquire Hi-Life International Co Ltd (萊爾富國際) to compete with its stronger rival President Chain Store Corp (統一超商), Citigroup Global Markets Inc said this week, although FamilyMart has dismissed the prospect in the short term.
Adopting a merger and acquisition (M&A) strategy could allow FamilyMart, which operated 2,926 convenience stores nationwide as of the end of last month, to narrow its gap with President Chain, which operates 7-Eleven convenience stores, Citigroup said in a report issued on Tuesday.
“Given [FamilyMart] management’s affirmation that they would consider M&A, we believe Hi-Life, with 12.8 percent market share [and about 1,300 outlets currently], could be a potential target,” Citigroup Taipei-based analyst Timothy Chen (陳建光) said in the report.
Chen said FamilyMart could play a key role in consolidating the convenience store sector in Taiwan, as the 7-Eleven chain already has a 50 percent market share, making further market share gains via M&A unlikely to get regulatory approval.
Therefore, consolidation, if any, might take place among FamilyMart and marginal players, which have been more difficult to expand due to less bargaining power with suppliers, partners and landlords, he added.
FamilyMart shares rose 0.24 percent to NT$208.5 yesterday on the GRETAI Securities Market.
They have risen 11.8 percent so far this year, compared with the over-the-counter index’s increase of 7.61 percent.
However, FamilyMart yesterday dismissed the report, saying the company had never discussed a merger with Hi-Life International.
“This is the first time the company has heard about this rumor,” FamilyMart public relations official Esther Lin (林翠娟) told the Taipei Times by telephone.
However, the company would not rule out the possibility if a good acquisition opportunity came up, she added.
In 2007, FamilyMart acquired Taiwan Nikomart Co (福客多), which then operated a convenience store chain with about 300 outlets.
Over the past five years, FamilyMart has replaced more than 100 OK Mart Co (來來超商) outlets with FamilyMart stores.
The company is now working to convert existing stores into new- format stores, a project that is expected to be completed in 2016, to raise its profitability.
In related news, President Chain, which runs more than 5,000 7-Eleven stores in the nation, is set to launch its first store on Orchid Island (蘭嶼, also known as Lanyu) tomorrow.
The company’s plan to open a store on the island — which had originally been free of chain convenience stores — has been met with mixed responses since its announcement in July.
However, President Chain said it would continue with its plans for the Orchid Island store, to fulfill a promise it made to provide services to people in remote areas, despite the Orchid Island outlet’s high operating cost estimate of NT$1.1 million (US$36,500) per year due to the cost of product shipping.
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