Reasons for selling IKEA Sentul City

Jakarta, CNN Indonesia

PT Hero Supermarket Tbk sell IKEA Sentul City Bogor to PT Archipelago Property Development (APD) worth Rp280 billion.

APD is an affiliate company of Hero where, both companies have the same board of directors or commissioners and are controlled by the same party, namely Jardine Matheson Holdings Limited.

“The total transaction value is IDR 280 billion,” wrote the information disclosure of the issuer coded HERO, Wednesday (1/9).

HERO explained that the income from this sale will be used to reduce loans and support working capital needs to the company’s operations.

“Give a positive impact on the Company’s financial condition created by debt repayments and provide the Company with financial flexibility to support future growth initiatives,” added the company in the disclosure.

Hero confirmed that through its subsidiary, PT Rumah Mebel Nusantara (RUMAH) it will remain the tenant of the IKEA Sentul City property after the transaction is based on a lease agreement with APD.

For information, the issuer HERO is one of the largest retailers in Indonesia which currently operates the Hero Supermarket retail business, Guardian Health & Beauty business, and the IKEA franchise in Indonesia through 99.99 percent of its subsidiary, namely RUMAH.

The company explained that currently trading conditions are quite challenging due to the covid-19 pandemic and resulted in quite challenging company finances in 2020. This condition is predicted to continue to occur in 2021.

“HERO’s balance sheet position has also decreased significantly over the last 12 months by recording a net cash position of Rp. 168 billion on December 31, 2020 and subsequently reporting a net debt position of Rp. 463 billion on December 31, 2020,” said the company.

Thus, after a detailed strategic business review, the company announced in May 2021 that it would change its trading approach by increasing its investment in the IKEA, Guardian and Hero Supermarket trademarks and shifting away from the Giant brand.

Following this announcement, the Company has explored divesting a number of its properties to give the Company greater balance sheet flexibility. One of them is by selling IKEA Sentul City to APD which will then be rented back to HOME.

This transaction will give the company the ability to monetize illiquid assets at fair market value and provide additional balance sheet flexibility to the company.

[Gambas:Video CNN]

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