Carrefour Faces a Retail Reversal In Revenue if Forced to Divest Alfa in Indonesia

French retailer Carrefour would suffer sharp losses in its Indonesian revenue if it were forced to sell its stake in PT Alfa Retailindo due to a ruling by the country’s antitrust regulator, an analyst said on Wednesday. Natalia Sutanto of PT Ciptadana Securities said Carrefour would be unlikely to fully recoup its costs on its Rp 737 billion ($77.4 million) purchase of Alfa last year if it were forced to divest. The company has one year to complete the sale. “From the market side, this year has been slow compared to last year, due to the global economic crisis,” Natalia said. Potential buyers generally expect discounts when sales of company stakes are forced, especially if there is a set deadline for the transaction, she said. Carrefour would also suffer significant losses in sales from losing the former Alfa outlets, Natalia added. On Tuesday, the Business Competition Supervisory Commission (KPPU) ruled that Carrefour had violated the nation’s 1999 Anti-Monopoly Laws by dominating the wholesale supplier market and using its leverage to force unfair trading terms. The KPPU fined the company Rp 25 billion ($2.6 million) and ordered it to sell its 79 percent stake in Alfa. The company said on Wednesday that it would appeal the decision. Currently, Carrefour has 75 retail outlets nationwide, including 30 acquired as part of the purchase of its stake in Alfa. Carrefour had finished converting the Alfa outlets into Carrefour Express stores, most of them large-sized supermarkets, by the end of last year. Speaking to the Jakarta Globe on Wednesday, Irawan D Kadarman, PT Carrefour Indonesia’s corporate affairs director, said the KPPU’s ruling would hurt the nation’s investment climate. “Despite this, we will still have a long commitment to stay in Indonesia,” Irawan said. He added that Carrefour had met all the requirements of the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) when it acquired the listed company on the Indonesian Stock Exchange (IDX). The Paris-based retailer agreed to buy Alfa from local retailer PT Sigmantara Alfindo and Singapore’s Prime Horizon for Rp 674 billion in early 2008, according to Bloomberg. Carrefour later increased its ownership in Alfa to 79 percent through a tender offer, costing the French giant an additional Rp 53.8 billion. According to the KPPU, the acquisition gave the company an effective 58 percent share in the national retail market, which violated national antitrust laws. Carrefour has strongly denied the KPPU’s charges. The company has cited an AC Nielsen survey that says the Alfa Retailindo acquisition only raised Carrefour’s share of the retail market to 17 percent. The 30 former Alfa outlets are located in Java, Sumatra, Bali, and Sulawesi, according to Carrefour’s Indonesian unit.

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