Analysis: Death of chairman adds to King Power uncertainty as Thai duty-free changes loom

Hotel Shilla

30/10/2018 03:21

* Chair of Leicester City and King Power died in chopper
crash
    * King Power faces challenges to dominance of Thai duty-free
market
    * Uncertainty over leadership of privately held King Power

    By Panu Wongcha-um and Chayut Setboonsarng
    BANGKOK, Oct 30 (Reuters) - The death of Leicester City
soccer club owner Vichai Srivaddhanaprabha adds to challenges
his King Power International empire faces as its dominance of
the lucrative Thai duty-free industry comes under scrutiny.
    Vichai, the founder of King Power, was killed on Saturday
along with four others when his helicopter crashed and exploded
outside the King Power Stadium in the central England city after
a Premier League match.  urn:newsml:reuters.com:*:nL8N1X809L
    His death comes just weeks before Thailand plans to hold an
auction for its duty-free and commercial concessions,
threatening to end King Power's near monopoly of the sector.
    State-owned Airports of Thailand Pcl (AOT)  AOT.BK , which
grants the concessions, may consider awarding licenses to
multiple operators, analysts said. Unlisted King Power currently
controls more than 90 percent of Thailand's duty-free market,
being a sole operator with concessions in all major airports in
the country until 2020.           
    AOT also plans to expand Bangkok's main airport, which will
increase commercial and duty free space up for auction by around
70 percent, increasing competition among retailers.
     Tourism is booming in Thailand, which received nearly 35
million visitors last year, most funnelled through the airports
where King Power is ubiquitous. But public debate has increased
over the single duty-free operator structure.
    "If there is more competition from others and this new
generation of leadership (at King Power) is not as effective as
Vichai's generation, then there could be changes (in the way the
licences are granted)," a senior government official told
Reuters, declining to be named due to the sensitivity of the
subject.
    "AOT has not been convincing enough in defending this model
so it will be a tough sell for them to come up with a bidding
terms or process that limits competition."
    AOT, which has said the current system is important to
provide continuity, declined to comment on the bidding process.
    "(King Power) has a successful history in duty free
retailing and the travel industry, now the question is how
effective King Power can be in engaging the government other
stakeholders without Vichai's leadership, especially in upcoming
auction for concessions in Bangkok, Phuket, Pattaya and Samut
Prakan," said Nattabhorn Juengsanguansit, Director at Asia Group
Advisors, a government affairs consultancy.
    "Winning the upcoming bid is crucial for King Power's
business and the future of Leicester football club.”
    Retail rivals including Central Group  CPN.BK , the Mall
Group and South Korea's Hotel Shilla  008770.KS  are interested
in bidding, analysts said.
    The companies declined to comment. 
    
    SUCCESSOR
    While it is not immediately clear who will take over from
Vichai, analysts and sources say Aiyawatt, Vichai's youngest son
and chief executive officer of King Power, and his widow Aimon
are most likely to run the family business. Aiyawatt's nickname
is Top.
    "Top has been his father's apprentice for more than 10 years
so he must have learnt a lot of his trade," said a politician
who has close ties with the Srivaddhanaprabha family.
    King Power declined to comment on who will succeed Vichai as
group chairman. Vichai's four children and his wife are part of
the executive team of the company. 
    A descendant of Chinese immigrants, Vichai founded what
became the King Power empire in 1989 with a store in Bangkok
selling duty free goods and souvenirs.
    His business took off in 2006 when it was granted a
concession at the new Suvarnabhumi Airport under the government
of then Prime Minister Thaksin Shinawatra.
    Even after Thaksin's ouster that year, Vichai's close
relationship with the royal family and a knack for winning
people over helped King Power navigate political turmoil. Vichai
became the country's fifth-richest person with an estimated net
worth of nearly $5 billion.
    For the group, which has been expanding into sports, winning
the upcoming duty-free license auction has become more crucial
to get steady cash flow and fund heavy investments to acquire
athletes and managing staff. 
    It bought Leicester City in 2010 and also owns Belgian
soccer club Oud-Heverlee Leuven.
    While Vichai has been public face of Leicester City, he
entrusted the task of running the team to Top, his 32-year-old
son.
    Top admitted he made some big mistakes while managing the
team, but also learned from them.
    "If I didn't make those mistakes, I wouldn't be here," he
told a TEDx Talk show in 2016, referring to his decision to fire
three team managers and buy expensive players who did not
perform well.
    Top said the team's failure to get promoted to the Premier
League in 2012/13 season was "torture" but three years later,
Leicester City beat odds of 5,000/1 to win the Premier League
title.
    Whether he can hit a similar jackpot with the group's
duty-free business remains to be seen.
    "I don't know how good Vichai's son is," the senior
government official said. "If he is as skilful as his father
then there is no problem, but we simply do not know."

 (Reporting by Chayut Setboonsarng, Panu Wongcha-um, and
Patpicha Tanakasempipat; Writing by Miyoung Kim; Editing by
Lincoln Feast.)
 ((miyoung.kim@thomsonreuters.com; 65 6870 3026; Reuters
Messaging: miyoung.kim.thomsonreuters.com@reuters.net))