S N Vasuki – Indonesia's Lippo Group has positioned itself as a major player in the retail sector with last week's acquisition of a 50.1 per cent stake in PT Matahari Putra Prima which runs the country's largest department store chain.

Analysts said the estimated US$350 million (S$495 million) buy will give Lippo a stronger foothold in the fast-growing retail sector and address criticism that the group was cashing out of Indonesia.

The Lippo group acquired Matahari through its listed retail vehicle PT Multipolar Corporation. Under a two-tier deal, Multipolar is acquiring 45 per cent of Matahari's equity and is also making a tender offer for an additional 5.1 per cent. The acquisition price works out to around 3,200 rupiah per share. One of the major sellers is reportedly the Darmawan family, which owns 52 per cent of Matahari.

The Multipolar-Matahari alliance has been in the works for several months. Matahari's promoter Hari Darmawan – who now takes over as president-director of Multipolar – was reportedly looking for a strong partner who would bring in capital and management expertise.

The Lippo Group, which had also approached listed Hero Supermarkets with a takeover offer, was apparently keen on diversifying from its core financial services operations.

"The acquisition of Matahari shares will make Multipolar one of the leading retail companies in Indonesia," a senior Lippo Group executive said last week. Multipolar is not new to the retail sector as it is the Indonesian franchisee for several popular international department store chains like WalMart, JC Penney and TimeZone.

Established in 1986, Matahari is Indonesia's largest department store chain operating over 90 stores in 29 cities. The company operates four store formats – Matahari Department Store which caters to lower-to-middle income families, upscale retail outlets under the Galleria marquee, Super Economy stores which are established in small Indonesian towns and Mega M, a wholesale retail chain.

Stockbroking firms estimate that Matahari has a 25 per cent market share in the Jakarta area and 50 per cent outside the capital. Senior officials of Matahari-Multipolar who organised an analysts' meeting in Jakarta on Tuesday were bullish about current year prospects.

During the year ended last Dec 31, Matahari is expected to report net earnings of 15 billion rupiah (S$8.9 million), a sharp fall from the previous year's 38.6 billion rupiah. Sales in 1996 touched 1.9 trillion rupiah compared to 1.43 trillion in 1995.

Company officials told analysts on Tuesday that the lower earnings in 1996 were due to higher inventory write-offs related to the closure of a few stores last year. For 1997, broking firms in Jakarta are forecasting sales of 2.4 trillion rupiah and net earnings of 65-90 billion rupiah.

Multipolar's financial results for 1996 were not immediately available. Matahari and Multipolar shares have risen sharply since the takeover announcement.

At mid-day yesterday, Matahari was trading at a six-month high of 3,450 rupiah. Multipolar touched a record high of 2,425 rupiah on Tuesday before it fell to 2,375 rupiah at mid-day yesterday.