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Modern International closes 7-Eleven operation in Indonesia

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JAKARTA (TheInsiderStories) – PT Modern International Tbk (IDX: MDRN), a seven eleven (7-Eleven) franchise provider in Indonesia, closed its operation in the country following the failed sale of shares to PT Charoen Phokpand Indonesia Tbk (IDX: CPIN).

Charoen through its subsidiary PT Charoen Pokhpand Restu Indonesia (CPRI) on April 19, 2017, signed a Business Acquisition Agreement with PT Modern Sevel Indonesia (MSI), a controlled company owned by Modern International. The transaction value is estimating Rp1 trillion (US$75.19 million).

The transaction is planned to be completed before June 30, following the fulfillment of transaction prerequisites, including approval from U.S’s Seven Eleven Inc. As the franchisor in connection with the termination of the franchise agreement with MSI and the appointment of CPRI as the new franchise recipient.

Chairman of Indonesian Chamber of Commerce and Industry, Rosan Roeslani told reporters, the reason behind the 7-Eleven closed it operation in Indonesia, due to their business model that isn’t compatible with Indonesia’s current condition, thin margins and low sales volume.

He continued, there are several reasons leading to the failure of 7 Eleven in Indonesia, one of it is that they rent vast spaces meant to accommodate social gatherings even though financially they are a business with a thin profit margin. It is a stark contrast compared to the successes of local well-known retail chains such as Indomaret and Alfamart.

Charoen canceled the 7-Eleven Acquisition from MSI cause there is no agreement between the two parties on several issues. Previously, The Thailand’s Charoen Phokpand’s unit seemed so ambitious to take 7-Eleven brand retail to develop the company’s business.

Director of Investa Saran Mandiri Hans Kwee judged, the The cancellation of the transaction disrupts the financial of MSI. Since 7-Eleven can no longer sell alcohol-free products, Hans considered as the starting point of the fall of the in Indonesia.

(Written by Linda Silaen, Email: linda.silaen@theinsiderstories)