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Case Study:

Makro turnaround and sale to Lotte Group of Korea


Makro was the first foreign retailer to be granted a license to operate a cash-and-carry business in China (1997). Their three local partners were handpicked by then Commerce Minister, and were among the biggest State Owned Enterprises (SOEs). Yet 7 years on, they were losing money and had only four stores in operation – Makro’s management contract was on the line. In 2004, Strategy613 was engaged by SHV Group, the owners of the global Makro franchise to turnaround the company.


We helped re-focus the business on Beijing where the stores were at key locations. By second half of 2006, Makro was one of the few profitable foreign retailing franchises in China. Once the operations had re-gained the confidence of the local partners, Strategy613 recommended streamlining of the shareholders on the Chinese side whereby COFCO would acquire the other Chinese owned stakes and control 51% of Makro China by acquiring the other partner’s stake at a valuation of RMB 450 million in early 2007. Having been credited with turning Makro China into a profitable outfit with two major shareholders, we were appointed to arrange the sale of Makro later that year. In addition to the potentially conflicting interests of the shareholders, there were added complexities of selling a foreign-SOE joint venture, as well as structuring difficulties such as having to hold public auctions at the Beijing Equity Exchange for COFCO’s stake. We worked on this transaction for nine months and sought out over thirty potential buyers. Finally in January 2008, Lotte Group of Korea won the bid at a valuation of RMB 1,250 million. The value represented almost three times the value COFCO paid for Chinatex’s stake one year earlier and about 180 times the LTM earnings at the time of pricing.

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