HONG KONG â€" A number of private equity groups have been knocked out of the running to acquire ParknShop, the Hong Kong supermarket chain owned by the billionaire Li Ka-shing that is considering selling itself in a deal that could command between $3 billion and $4 billion, according to people with knowledge of the matter.
Kohlberg Kravis Roberts and TPG Capital are among the private equity investors that are no longer in the bidding, two people with knowledge of the matter said on Wednesday, asking not to be identified because the information was not public. The handful of bidders remaining are all retailers and include state-owned China Resources Enterprise and AEON Group of Japan, one of the people said.
“It remains to be seen how competitive this auction really is, but private equity does not really see value at the kind of levels they are talking about,’’ said one person close to a private equity group that had submitted a bid. ‘‘If you are a strategic investor and you can make any synergies with your existing business in Hong Kong or China, then maybe it makes more sense.’’
Mr. Li is the richest person in Asia, and ParknShop, part of his conglomerate Hutchison Whampoa, is one of two dominant supermarket operators in Hong Kong, with a market share of 35.4 percent last year, according to figures from Euromonitor International.
The Wellcome supermarket chain, owned by Singapore-listed Dairy Farm International, a unit of the rival Asian conglomerate Jardine Matheson, controls 41.4 percent of the market, according to Euromonitor. CR Vanguard, a supermarket chain owned by China Resources, has a 7.8 percent share.
The high concentration of market share among a small number of competitors is a characteristic found in many areas of Hong Kong’s small but lucrative domestic economy. But unlike the situation in mainland China, where the supermarket sector is a fast-growing and highly fragmented business, the sector in Hong Kong is considerably saturated and sales growth has slowed in recent years, according to analysts.
Total supermarket sales in Hong Kong rose to 24.1 billion Hong Kong dollars, or $3.1 billion, in the first half of the year, up 7.2 percent from the same period a year earlier. That was slower than the 10.3 percent sales growth in 2012, and 12.4 percent in 2011, according to government figures.
At the same time, the retailers in Hong Kong have been forced to grapple with rising costs. Retail rents have doubled in the past 10 years, according to official statistics.
Early this year, Hong Kong raised its minimum wage to 30 dollars, up from the 28 dollars it had been set at since it was first introduced two years ago.
News that K.K.R. and TPG were no longer in the running for ParknShop was reported earlier on Wednesday by Reuters.
Hutchison had announced on July 20 that it had started a strategic review of the supermarket business to ‘‘optimize value for shareholders.’’ But it emphasized that ‘‘there can be no assurances that the process will result in any transaction being announced or completed.’’
