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

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.. Casin

NEGOTIATION   

Topic: Negotiation between Central Group and Casino Group in

buying Big C Vietnam

Hanoi, June  2021

1 CASE 1

1 CASE

The Central Group of Companies or Central Holding, founded in 1947, is a

family-owned 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

2 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 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

1 in Brazil and Colombia) with sales reaching over $50 billion/year

3 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

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 consumer-focused 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 do

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

The pressure of $ 4 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.

4 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 $ 4 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

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

5 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

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 do 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

6 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

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 1

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

7 BATNA

7.1 Casino Group

This case puts Casino Group in a comfortable position as they hold an attractive

Lotte (Korea) and Vingroup, Masan, Saigon Co.op and so many more Therefore, all Casino has to do 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 do their best to get the deal with Casino Group

8 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