The British grocery chain on Monday chose Dhanin Chearavanont's operator of 12,000 7-Eleven convenience stores over the Chirathivat family's Central Group of Companies Ltd - Thailand's biggest retailer by market capitalisation - and beer magnate Charoen Sirivadhanabhakdi's TCC Group Co Ltd, said people with direct knowledge of the matter.
Interest from the tycoons and their overlapping businesses in a deal only flagged in December has already drawn what sources said was the Thai watchdog's first pre-transaction warning about antitrust compliance.
The Office of Trade Competition Commission (OTCC) found its voice after becoming independent under new laws in 2017 with a mandate to block transactions that would create monopolies, at a time of increased public scrutiny of tycoons' business empires.
The first deal the watchdog has to rule on is the country's largest, topping when Charoen Pokphand Group Co Ltd (CP Group) paid $9.4 billion for a minority stake in Ping An Insurance Group Co of China Ltd in 2012, Refinitiv data showed.
"The transaction pits one of the most influential family conglomerates against a newly empowered regulator," said Ben Kiatkwankul, partner at consultancy Maverick Consulting Group. "The asset's size and increasing public sentiment versus tycoon dominance in the economy will make the OTCC's task challenging."
CP Group runs its 12,000 7-Eleven convenience stores through CP All PCL and about 80 cash-and-carry stores under Siam Makro PCL.
The firm on Monday said, upon antitrust approval, the deal will give it "a complementary retail business ... and enable the company to operate a wider range of outlets."
It will gain control of 1,965 stores Tesco operates in Thailand - much of which the British firm bought from CP Group during the 1997-8 Asian financial crisis. Included are 200 Tesco Lotus hypermarkets and 1,600 Tesco Lotus Express convenience stores. It will also buy 74 outlets in Malaysia.
The OTCC is awaiting CP Group's request for merger approval to study the impact on the economy, market competition and consumers, Somsak Kiatchailak, secretary-general of the OTCC, said on Monday.
The commission will consider whether to approve, reject or approve the merger with conditions within 90 days of the request, he said.
OTCC Chairman Sakon Varunyuwatana previously told Reuters the watchdog had set up a committee to rule on the deal and that it was able to provide a preliminary review of each proposed Tesco bid upon suitor request - though none had been received.
"We are ready with a committee and have mapped out several scenarios," Sakon said. "The committee is comprised of economists, academics related to the retail business, competition law experts and our own officers and experts."
"We can tap into information across other agencies to support our investigation," he said.
Under the 2017 law, proposed mergers that could lead to market dominance or monopoly must be reviewed by the OTCC committee, which approves or rejects the proposal based on business necessity and its impact on consumers and the economy.
Dominance is defined as having a market share of over 50%, or 75% when combined with two peers.
"The question is how antitrust is defined," said a banker familiar with the deal. "Will 7-Eleven stores be included to calculate market share?"
In 2018, the energy regulator blocked Global Power Synergy PCL proposed $4 billion merger with Glow Energy PCL over monopoly concerns regarding industrial estates. It finally approved the deal on condition Glow sold a power provider.
The likely outcome for the Tesco deal is regulatory approval with broad conditions - and with a very public explanation, said Jirapong Sriwat, Partner at Nishimura & Asahi (Thailand).
"The Thai public is not afraid to express strong opinions towards tycoons. These views have been echoed in parliament and could gain momentum in other industries," said Kiatkwankul.
"The OTCC's mandate is to protect public interest and market competition and so it will have to set a clear precedence."
By Chayut Setboonsarng and Anshuman Daga