Hey, SEIC is taking it on the chin today too. But I have something to share with my fellow CPPKY investors. I did a little poking around on the Internet today. Turns out there is more information out there than Dessauer is providing us. For instance, did you know they sold their interest in the El Choro motorcycle company? Read on:
PAYING FOR AN EMPIRE
Past ambitions catch up to Charoen Pokphand
BY JONATHAN SPRAGUE AND JULIAN GEARING/BANGKOK
FROM CHICKENS TO TELEPHONES to motorcycles to satellites - Dhanin
Chearavanont was the man who could do it all. And for a while he was succeeding as his Charoen
Pokphand Group grew from an animal feed producer into Thailand's top multinational with an
estimated $7 billion in revenues, and one of the biggest foreign investors in China. Now, suddenly,
Dhanin is struggling, selling off outlying squadrons in an effort to keep his sprawling fleet of
companies afloat amidst rising oceans of debt.
One of Asia's richest tycoons, Dhanin faces an embarrassing default by a flagship enterprise, Hong
Kong-listed CP Pokphand, the holding company of his China investments. Worries that the
money-making China operations will be milked to support CP Group's struggling units at home
grew when Dhanin in April reportedly sold 32 million shares in CP Pokphand at HK$1.08 a share,
even though he bought 2.6 million shares last November for HK$1.52 each. "CP Group needs
money for their Thai operations and to repay their debts," says Youssef El-Khouri Abboud, a senior
analyst with Cathay Capital in Bangkok.
Holders of CP Pokphand's floating rate notes due April 2000 then exercised an option to get their
$92.8 million back right away. But, to investors' dismay, CP Pokphand said it does not have the
cash. Instead, it called a meeting for May 29 with note holders to ask them to withdraw their
redemption request. Then last week it sold one of its highest-profile investments, a half-stake in
Shanghai Ek Chor Motorcycle, to its Chinese partner for $12.8 million. "Like many companies in
Asia, CP Pokphand has been affected by the tighter financial conditions in the region," said Sumet
Jiaravanon, the unit's president and Dhanin's brother. "This disposal will provide a cash boost to the
company, and we will continue to examine ways to improve liquidity further."
What a difference a year makes. Back then, CP Group's TelecomAsia had installed 2.6 million
phone lines in Bangkok and sold over a third of them, and its CP 7-Eleven unit's franchises were
popping up all over the country. In China, where it has over 200 operations, CP launched a chain of
Lotus Supercenter discount markets and was thinking of getting into semiconductor production.
And the group's core agribusiness operations continued to grow, making Dhanin Asia's undisputed
poultry king.
But then the floor fell from under the baht and CP Group, already heavily indebted to fund rapid
expansion, began to struggle. It sold its stake in China-backed APT Satellite late last year and
merged its Bangkok cable television operation UTV with rival IBC of Shinawatra group in
February. But that was not enough. TelecomAsia said in March it wanted to delay payments on $40
million in loans, and CP Group said it hoped to sell stakes in units in Thailand, China and elsewhere.
Now that it has sold Ek Chor Motorcycle, CP is believed to be asking joint-venture partner
Heineken to buy out its stake in a Shanghai brewery. Also on the block - shares in TelecomAsia,
CP 7-Eleven and more. "Not everything is up for sale," says CP Group executive vice president
Sarasin Viraphol. But he admits: "We are planning to sell stakes in agriculture, satellite,
petrochemical and retailing."
Yet while he needs the money, Dhanin is not willing to give up control. "If the participation by
foreign investors will strengthen us financially and improve the level of our technology, we would
welcome it," he told the Thai media, but added: "We do not want to lose management control." That
was not a problem when investors wanted to piggyback on CP's deals, but it may be harder now.
Still, not all of Dhanin's empire is in trouble. Korsak Chairasmisak, chief of CP's retail operations,
says economic crisis has not hurt the corner store. Investors are still lining up for 7-Eleven
franchises, while Lotus expects to expand from its Shanghai base into neighboring provinces in
China.
Agribusiness is also holding its own. Thai chicken exports are booming and the well-entrenched
China animal feed operations will survive. And Dhanin remains eager to go high-tech - in March CP
and Microsoft agreed to launch pilot projects to develop television set-top box technology and to
put CP's 7-Eleven stores on line. But Dhanin may have to rethink his thrusts outside CP's core
businesses, says Capital's Abboud. Retail and food are logical expansions for the chicken king, but
satellites and motorcycles are a stretch. Dhanin's brother Sumet hinted as much. "Longer-term, our
strategy is to focus on these core elements such as our agribusiness division in [China], which has
been growing steadily and profitably," he said. In the end, Charoen Pokphand may emerge from its
cash crunch leaner, fitter and more focused. |
