Woolworths Might Be Buying A Huge Hong Kong Grocery Chain But Investors Are Worried

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There’s talk that Woolworths might be buying the second largest grocery chain in Hong Kong, ParknShop, but plans to use cheap Asian debt to fund the $US3 billion acquisition have investors worried that the deal won’t be that profitable.

In what would be the company’s first overseas investment since 2005, Woolworths’ expansion plans have investors worried about the whether the deal has growth potential and if it is even worth the money, considering the profit it is expected to make.

ParknShop, which recorded a revenue of $HK21.7 billion last year, has more than 260 outlets in Hong Kong, Macao, and Mainland China.

The expansion is also a sign that the major retailer is running out of growth opportunities in Australia with Investors Mutual retail analyst Julian Beaumont telling the AFR the company “has grown so large in its retail markets that it has limited means to grow from here.”

Analysts have suggested raising equity to fund the acquisition would be a better alternative.

“If they can get it for a reasonable price and use equity to buy it that’s the best way to do it because they’re quite highly rated at the moment,” Aberdeen Asset Management senior investment manager Andrew Preston told the AFR.

AFR has more.

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