Negotiation between Central Group and Casino Group in buying Big C Vietnam

        NEGOTIATION    Topic: Negotiation between Central Group and Casino Group in buying Big C Vietnam           Hanoi, June  2021 TABLE OF CONTENTS CASE BACKGROUND INFORMATION 2.1 Needs 2.2 Positions 1 TYPES OF NEGOTIATION GOALS 4.1 Casino Group 4.2 Central Group 4 5 DUAL CONCERN MODEL COMMONALITIES AND DIFFERENCES 6.1 Commonalities 6.2 Differences 7 7 BATNA 7.1 Casino Group 7.2 Central Group 8 8 ADVANTAGES AND DISADVANTAGES NEGOTIATION POINTS 9.1 Casino Group 9.2 Central Group 9 10 10 STRATEGY 10.1 Casino Group 10.2 Central Group 10 10 11 11 RESULTS 11 REFERENCES 12 1 CASE The Central Group of Companies or Central Holding, founded in 1947, is a familyowned conglomerate holding company in Thailand involved in merchandising, real estate, retailing, hospitality, and restaurants Among its subsidiaries are Central Pattana and the Central Retail Corporation Its current CEO is Tos Chirathivat, grandson of the company founder Its chief rival is The Mall Group, which owns Siam Paragon and The Emporium, and several suburban shopping centers Casino Group or Casino Guichard-Perrachon is a French mass-market retail group Retailing involves distributing safe, high-quality products, but it also means welcoming, connecting, serving, bringing together, and even reassuring people Since 1898, Casino Group has developed and enhanced its banners in France and Latin America to satisfy all consumer expectations Casino Group operates across all food and non-food formats: hypermarkets, supermarkets, convenience stores, discount stores, and wholesale stores Casino Group, currently managed by Jean-Charles Naouri, is quoted on the Paris Stock Exchange, with the Rallye company as a majority shareholder In 2017, its total revenue was €37.8 billion Groupe Casino has sold Big C Vietnam to Thailand’s Central Group in a deal valued at €1 billion ($1.14 billion), marking a further step in the French grocer’s plans to cut its debt Casino launched an ambitious debt-reduction program late last year, which included selling Big C Vietnam and its Thai retail assets and some real estate holdings in Latin America The latest sale will take the deleveraging plan to €4.2 billion, Casino said BACKGROUND INFORMATION 2.1 Needs Needs are the goals pursued by an individual or a group in order to survive In this business transaction, Big C to Central Group is a special thing because this retail chain has been the "biological child" of the group since 1993 During the economic crisis in 1997, Central had to sell Big C to Casino Group But the desire to regain the "abandoned child" in the past is the primary motivation for the Central Group to express its determination in this deal Besides, Casino Group decided to exit the Asian market completely because the total Asian sales of Casino Group were only about $3.5 billion, ranking the lowest among its demands 2 2.2 Positions Central Group, which was established in 1927, is known as a famous family group in Thailand operating in many fields related to real estate, retail, hotels, and restaurants Starting his business from a small grocery magazine on the west bank of the Chao Phraya River, founder Tiang Chirathivat gradually developed the Central Group into a corrosive diet In addition to being one of the five largest business groups in Thailand, Central Group is also known as one of the most labor-intensive training groups in the country of Chua Thap Casino Group (was established in 1898) is a French multinational corporation with the main business of retailing and distributing goods through hypermarkets and supermarkets that is ranked 15th in the world and holds a dominant position in the South American market (No in Brazil and Colombia) with sales reaching over $50 billion/year TYPES OF NEGOTIATION Big C Vietnam has a network of 43 stores and 30 shopping centers and achieved net sales in 2015 of €586 million ($666 million) According to the press release, Central Group, in partnership with the Vietnamese Nguyen Kim Group, will continue the strategy of Big C Vietnam in particular concerning the supply of goods produced in Vietnam for Big C stores Casino continues its procurement of Vietnamese food, which will be distributed in France, Brazil, and Colombia Big C Vietnam has built strong relationships with Vietnamese suppliers and farmers, customers, employees, and local authorities and communities, which allowed the development of modern retail in the country Japan’s Aeon, Vietnam’s Masan, South Korea’s the Lotte Group, Thailand’s Central Group, and Berli Jucker all competed to buy Big C Vietnam In early 2016, Thai tycoons were pushing the speed of acquisition of Vietnam’s wholesale and retail system Two Thai groups owned by the second-richest billionaire of Thailand and the Central Group have declared their wish to acquire the Big C system Earlier, Casino Group (France) mentioned the sale of the Big C supermarket chain in Vietnam Casino does not consider its key market Casino currently owns 58.6% of Big C Supercenter Thailand – the firm with a total capitalization of $5.5 billion Casino wanted to sell the shares in Thailand after saying to sell its stake in Vietnam in January Casino launched an ambitious debt-reduction program that included selling Big C Vietnam and its Thai retail assets and some real estate holdings in Latin America 3 Central Group, which has interests spanning from hotels and resorts to property and restaurants, also bid when Casino was selling its Thai assets, eventually losing out to Thai tycoon Charoen Sirivadhanabhakdi Mr Chaoren bought French retailer’s majority 58.6% stake in Big C Thailand for €3.1 billion The latest deal adds to a flurry of M&A activity in Vietnam, especially by Thai tycoons, who are looking at snapping up stakes in consumerfocused companies, aiming to profit from the country’s fast-growing middle class The acquisition of Big C’s Vietnam assets will boost Central Group’s footprint in that country In general, the main reason why Central Group targets Big C and not any other supermarket system is that Big C Vietnam has built a good relationship not only between suppliers and customers but also includes employees, local authorities, and local and international communities This makes it easier for them to grow and expand their network further Central Group is owned by Thailand’s third richest man Tos Chirathivat, who, according to Forbes, has a net worth of $12.3 billion According to Central Group’s website, the company had total sales of $7.5 billion in 2013 and a store network of 4,400 branches From the perspective of the brand, Thai groups have made a pretty good move In this way, they can reduce funding to build a new brand from the beginning and save time, money, and effort To develop a new retail brand in a market with many big brands, the competition will be very fierce Getting a new business license in the retail sector is also complex and difficult for foreign investors The brands that Thai groups bought and want to own are huge and have a long history For example, Big C has been in VietNam since 1998 The brand has distribution systems that stretch across the country, which have ecome very familiar to Vietnamese consumers Thai investors choose the shortest way to succeed; they are investing large sums of money from the beginning Not only Thais but many international investors it that way However, when these distribution channels (Big C is a telling example) belong to Thai investors in general and Central Group in particular, it is a risk for Vietnamese businesses because Thai products have good quality, competitive price, and have gained the confidence of Vietnamese consumers The near geographic distance and the open policies on tariffs of the ASEAN Economic Community (AEC) will enable the flood of Thai products in Vietnam in the coming years Thais know how to take advantage of tax exemptions in AEC Thai goods firstly help consumers access quality products at affordable prices At the same time, they also create pressure on Vietnamese enterprises to reform and improve their competitiveness 4 The pressure of $ billion in debt made Casino Group (France) not care about the origin of the investor, but only needed to obtain the highest value That goal makes the M&A market in Vietnam witness an unprecedented value-for-money deal from "players" in the distribution, retail, experts and media markets However, after the price chase, at the last minute, Central Group had "carried" Big C Vietnam for 920 million euros (equivalent to $1.05 billion) Looking at the strengths of Big C Vietnam, Casino's move is not a divestment in a negative sense, but rather how they restructure their assets to operate more efficiently The growth potential of this retail chain in Vietnam is quite immense, so Casino aims to obtain the highest value from the sale of Big C Vietnam The fact that many domestic and foreign names plunged into the "war" to acquire Big C Vietnam is completely understandable Because if they succeed, they can dominate the distribution and retail market and will outstrip their competitors Casino has created a fair deal for all parties, regardless of the origin of the bidder The winner of the auction depends entirely on commercial terms In conclusion, The deal between Central Group and Casino is win-win negotiation GOALS Going into the negotiation means that both parties already had certain goals in mind and by understanding them, the easier for agreement to emerge 4.1 Casino Group The direct goal we can see from Casino Group is selling Big C Vietnam as they marketed the franchise to multiple companies to great success After all, this is the main topic that would be discussed in the negotiation However, underneath it are indirect goals that the company wants from the deal Because of the pressure of $ billion in debt, Casino decided to sell assets, including BigC Thailand and BigC Vietnam Casino Group will not care about the origin of investors because the goal in the deal is to sell at the highest price The company wants to concentrate on its core markets: Europe (France - 18.8 billion euros) and Latin (22.6 billion euros), not to mention the newly developed e-commerce segment but the results have been very positive when having the same revenue as the Asian retail market 5 4.2 Central Group On the other side, there is Central Group with the very clear goal of wanting to buy Big C Vietnam after seeing the offer to sell from Casino Group But also similar, Central Group also had other goals in mind Big C is a special asset to Central Group due to the fact this retail chain has been owned by the institution on account of 1993 During the financial disaster in 1997, Central had to sell Big C to Casino Group Deciding to regain Big C is the primary motivation for the Central Group to show its dedication to this deal The main reason why Central Group targets Big C is that Big C Vietnam has built a good relationship not only between suppliers and customers but also includes employees, local authorities, and local and international communities This makes it easier for them to grow and expand their network further Additionally, this is completely in the group's strategic plan to expand the development network in the ASEAN region By this way, they can reduce funding to build a new brand from the beginning, and save time, money and effort To develop a new retail brand, in a market with many big brands, the competition will be very fierce Getting a new business license in the retail sector is also complex and difficult for foreign investors DUAL CONCERN MODEL The Dual Concern Model assumes that parties’ preferred method of handling conflict is based on two underlying dimensions: assertiveness and empathy The assertiveness dimension focuses on the degree to which one is concerned with satisfying one’s own needs and interests Conversely, the empathy (or cooperativeness) dimension focuses on the extent to which one is concerned with satisfying the needs and interests of the other party 6 In the Big C acquisition case, it belongs to the collaboration type which is highly assertive and highly empathetic at the same time Both the Central Group and Casino Group are benefited in this case They are concerned about the underlying relationship and are sensitive to the other person’s needs while simultaneously being committed to having their own needs met They see conflict as a creative opportunity and not mind investing the time to dig deep and find a win-win solution With the potential growth of Big C as well as the Vietnamese market, Central Group has benefited from the opportunity of owning Vietnam's leading retail chain and it is an important step in expanding in the ASEAN market From Casino Group’s perspective, they can gain a huge amount of money from selling these assets to cut down a debt of $4 billion The strategy of Casino in this negotiation is that they are mostly based on the money relationship during the bidding process In the 1st round of the bidding process, lots of companies inside and outside join in bidding with a really high price since BigC in Vietnam is one of the biggest retailers in the market, and Central Group is also one of them After several rounds of bidding, BigC decides to agree with the price that Central Group offers and officially sells BigC for Central group Standing on the Central Group side, they have a bigger purpose with the strategy to expand and strengthen their retail market in Vietnam since back at that time, they had already had $600 million revenue with 6000 employees in their Vietnamese branches (2015) Therefore, if they can own BigC, these numbers can grow double With all of the above, Big C and Central Group have gained a collaboration relationship in this negotiation COMMONALITIES AND DIFFERENCES Integrative negotiation is a negotiation strategy in which parties collaborate to find a "win-win" solution to their dispute This strategy focuses on developing mutually beneficial agreements based on the interests of the disputants Therefore, emphasizing the commonalities and differences between the parties is a vital step to help a successful negotiation Carrying out analysis on commonalities and differences will help negotiators understand the adversary's interests Then negotiators will be better equipped to negotiate an agreement that will be acceptable to both parties 7 6.1 Commonalities Firstly, the two companies share the commonality in the line of business Central Group and Casino Group (the holding company of Big C Vietnam) are both large and long-standing groups operating in the retail sector Secondly, these enterprises are similar in positioning Central Group was established in 1927 It is currently operating in the fields of real estate, retail, restaurants and hotels The largest asset of the group is Central Retail - one of the largest retail groups in Thailand, which owns some shopping centers such as Robinson, Central and Zen The Casino Group was established in 1898 This French retail group is ranked 15th in the world and holds a dominant position in the South American market (No in Brazil and Colombia) Thirdly, both enterprises witnessed the similarity in the customer size The vision of all two corporations towards all types of customers, all ages and all levels of society Besides, Consumers' needs of Vietnamese people are similar to those of Thai people due to being Asians Lastly, organizational culture is the same in both companies Human resource development is an investment activity, not a cost activity for both companies The staff are professionally trained to improve their professional skills Additionally, national culture has a great influence on organizational culture Vietnam and Thailand are both Asian countries, so there are typical customs and habits of the Eastern people Hence, Big C Vietnam supermarket chain with most Vietnamese staff will have the same lifestyle and working style as Thai people 6.2 Differences The primary thing that made the difference between two companies is the business model Central Group is a family - run business Therefore, family members hold all key positions including about 150 people in this family who are working at the corporation On the other hand, Casino Group is a type of public company For Big C Vietnam, the General Director directly manages the marketing department, the systems of its branch stores and agents BATNA 7.1 Casino Group This case puts Casino Group in a comfortable position as they hold an attractive property that many want to buy Aside from Central Group, there are also TCC, Aeon (Japan), Lotte (Korea) and Vingroup, Masan, Saigon Co.op and so many more Therefore, all Casino has to is go for the one that offers the highest payment 7.2 Central Group In contrast, Central Group is in the weaker position, as there is really no alternative that is as attractive as Big C Vietnam on sale This means they need to their best to get the deal with Casino Group ADVANTAGES AND DISADVANTAGES Vietnam is being evaluated as one of the most potential retail markets in Southeast Asia with sales of about $110 billion last year This is the fertile land that retailers around the world want to occupy Big C is the retailer with the best prices and the most promotions - this is the inherent strength of BigC, even when changing owners, they always pursue this strategy to compete with other brands Furthermore, Big C Vietnam has built a good relationship not only between suppliers and customers, but also with employees, local authorities and the local and international community This makes it easier for them to expand its development network in the Asean region When Central Group acquired Big C, they not only bought back all fixed assets but also the value of intangible assets including domestic brands and knowledge of the national business environment This knowledge can reduce the risk of not understanding the host country's culture On the other hand, Casino Group could focus on its main markets, which are Europe (France - 18.8 billion euros) and Latin ($22.6 billion), not to mention the newly developed e-commerce segment which has had very positive results when it has sales equal to the whole Asian retail market Moreover, the Big C supermarket system currently operates 21 trade centers in major provinces and cities across the country, employs 8,000 employees, and has experience in the business, selling 50,000 items, of which 95 % are produced in Vietnam Every year, Big C contributes to promoting about 1,000 containers of Vietnamese goods in Latin America, Europe, and the Indian Ocean region Every year Big C welcomes about 45 million shoppers These are the reasons why the attractive market has drawn many potential buyers (Aeon - Japan, Lotte Group - Korea, Berli Jucker - Thailand), which helps the value of Big C to be pushed up with the highest price, and is also disadvantageous for Central Group 9 NEGOTIATION POINTS 9.1 Casino Group 9.1.1 Walkaway point The price beyond a negotiator won’t go As a seller, this number is the lowest you can go (discount) before the deal no longer makes sense Casino Group has made significant investments for more than 18 years in developing its subsidiary Big C in Vietnam and to create a leading food retailer in Vietnam Big C Vietnam consists of a network of 43 stores and 30 shopping malls and in 2015 recorded turnover excluding taxes of $665 million The firm earlier expected to fetch some US$800 million from the sale Therefore, Casino’s walkaway point was $800 million 9.1.2 Target point The point at which a negotiator would like to conclude negotiations is an optimal goal TCC Group's acquisition of BigC Thailand for $ 3.5 billion (EV / EBITDA 1.7 times), so BigC Vietnam is expected to have a surplus because investors are willing to pay higher prices because of more growth potential than Big C Thailand The Chairman Advisor of Casino Group Jacques Fourvel affirmed that Big C Vietnam can absolutely sell for 1.7 times the revenue, even higher at times of revenue Thus, the target point of this corporation was about $1.3 billion 9.1.3 Asking price Asking price is the point at which the buyer is not willing to pay as much as the seller wants to sell for Despite the pressure of $ billion in debt, Casino has agreed to sell its stake in Thailand’s Big C Supercenter to the country’s TCC Group for €3.1bn excluding debt in a deal that will help the French retailer halve its net debt Therefore, Casino Group needs at least €1.9bn to pay the debt The asking price of Casino Group was $1.5 billion (equivalent to €1.9bn) 9.2 Central Group 9.2.1 Initial offer In March 2016, the CEO of Central Group claimed that they had already had 58.56% shares of BigC Thailand, and they didn’t have any intention to create a new retail chain to compete with TCC Group (another big corp in retailing in Thailand) Instead of doing that, 10 they want to invest their money in buying BigC Vietnam with the aim to expand their market share in the Southeast market, and in Vietnam, this company has already had a significant number of stores and staff working for them With that aim, at first, they intended to buy BigC with the price of $800 million - $1 billion By starting with the lower end, Central Group would first offer $800 million 9.2.2 Target point At the same period of time, in Thailand, Central Group has just finished the deal to sell 25% shares of BigC Thailand to TCC Group, and this deal gave them $1.4 billion back After that, with this background, they decided to step into the bidding process to buy BigC Vietnam with the target point: $1 billion 9.2.3 Walkaway point The walkaway point of Central Group is generally unclear since, in this case, Casino didn’t take the background of the buyer into consideration; they just cared about the price that other companies will pay for this deal The final result is quite obvious that Central Group is the party that offers the highest price which made them officially become the new owner of BigC Vietnam If we base on the capacities of Central Group after the deal with TCC about BigC Thailand mentioned above, the walkaway point could be around $1.3 billion 10 STRATEGY With different and even opposing goals in mind, both companiesCompanies would have strategies to influence the other and get the best deal 10.1 Casino Group The very first thing they can is give out the price first This would mean starting with the $1.5 billion marks By stating their price first, not only can they show the other party their perspective, but also create a benchmark for all the negotiations that would follow later on Another way they can push Central Group is by presenting the value of the franchise These would come in the form of annual reports and other documents, showing the success and position of Big C Vietnam If they want to push even further, talking about the potential 11 of investing in the Vietnamese market is also good By putting emphasis on the strength of the franchise, the other party would not want the chance to slip and more likely to lower their target However, arguably the most powerful one would be referencing other offers As mentioned, Casino Group is sitting in a good position as many want to get their hands in Big C Vietnam, so all they need to is accept the best offer By referencing them, Central Group would have little choice but to offer an even higher offer or not get the deal 10.2 Central Group Similarly, Central Group can also give out the price first for the same reasons above Showing perspective and creating a benchmark are crucial for successful negotiation Another thing Central Group can is offer attractive payment methods As mentioned, the goal of Casino Group is to pay back their debts by selling Big C Vietnam With this in mind, Central Group can offer to pay with their shares, and considering they are a relatively stable corporate, the shares are likely to increase in value in the future That is a good offer from Casino Group’s perspective while also allowing Central Group to lower the price offer due to the future value the shares offer 11 RESULTS In the end, the two companies reached an agreement of $1.05 billion and got both what they wanted within the settlement range Casino successfully sold the franchise to the best offer, while Central Group was able to fulfill their next step in the journey to expand their business in the ASEAN market REFERENCES Anh Hoa, 2016 Thâu tóm Big C Việt Nam, Central Group muốn thành “ông trùm” M&A [online] baodautu Available at: [Accessed 25 May 2021] 12 Báo điện tử Dân Trí 2016 Central Group thức mua lại Big C Việt Nam với giá tỷ USD [online] Available at: [Accessed 22 May 2021] En.wikipedia.org n.d Central Group - Wikipedia [online] Available at: [Accessed 25 May 2021] En.wikipedia.org n.d Groupe Casino - Wikipedia [online] Available at: [Accessed 25 May 2021] Groupe Casino 2020 Presentation - Groupe Casino [online] Available at: [Accessed 27 May 2021] Hằng, Đ., 2016 Central Group tham gia mua lại Big C Việt Nam [online] Báo Thanh Niên Available at: [Accessed 26 May 2021] KTĐTOnline, 2016 thương vụ M&A lớn 2016, BigC chiếm đầu bảng với giá trị 1,1 tỷ USD [online] Tin nhanh chứng khốn - Cổng thơng tin Tài chính, Chứng khốn Available at: [Accessed 23 May 2021] Minh, Đ and Kiên, V., 2016 Học từ thương vụ mua lại Big C, cạnh tranh trở thành đối tác Massan đấu thầu thoái vốn [online] BTCVALUE JSC Available at: [Accessed 21 May 2021] nhipcaudautu.vn 2020 Gia tộc người Thái đứng sau Big C với bí hịa thuận chung sống [online] Available at: [Accessed 25 May 2021] P.V, 2016 Central Group bán Big C Thái Lan 1,4 tỷ USD, mua Big C Việt Nam 1,1 tỷ USD [online] Viettimes Available at: [Accessed 25 May 2021] Vneconomictimes.com 2016 Central Group acquires Big C Vietnam [online] Available at: [Accessed 27 May 2021] 13 vtc.vn 2019 Tỷ phú Thái thâu tóm Big C ? [online] Available at: [Accessed 28 May 2021]  ... Differences 7 7 BATNA 7.1 Casino Group 7.2 Central Group 8 8 ADVANTAGES AND DISADVANTAGES NEGOTIATION POINTS 9.1 Casino Group 9.2 Central Group 9 10 10 STRATEGY 10.1 Casino Group 10.2 Central Group. .. Because of the pressure of $ billion in debt, Casino decided to sell assets, including BigC Thailand and BigC Vietnam Casino Group will not care about the origin of investors because the goal in. .. [Accessed 25 May 2021] Vneconomictimes.com 2016 Central Group acquires Big C Vietnam [online] Available at: