Fuzhou-based Yonghui com­pletes stake sale to Dairy Farm to fund ex­pan­sions

China Daily (Canada) - - FRONT PAGE - By ZHU WENQIAN zhuwen­qian@chi­nadaily.com.cn

Yonghui Su­per­storesCoLtd, the Fuzhou-based su­per­mar­ket chain and one of China’s For­tune 500 com­pa­nies, has com­pleted the sale of 5.7 bil­lion yuan ($912 mil­lion) worth of shares, around 20 per­cent, to Dairy Farm In­ter­na­tional Hold­ings Ltd to fund var­i­ous ex­pan­sions in­clud­ing the set­ting up of an e-com­merce plat­form.

It is the sec­ond time Yonghui has raised funds by sell­ing stock af­ter it went public on the Shang­hai Stock Ex­change in 2010.

Yonghui said it aims to use the funds to launch fur­ther re­tail out­lets, up­grade its store man­age­ment sys­tem, build a se­ries of lo­gis­tics dis­tri­bu­tion cen­ters, as well as build an e-com­merce plat­form.

Dairy Farm is an Asian re­tail gi­ant and a mem­ber of the Lon­don-listed con­glom­er­ate Jar­dineMathe­son Group.

It is buy­ing 813.1 mil­lion shares in Yonghui at 7 yuan each as it seeks to fur­ther tap China’s con­sumer mar­ket.

“Dairy Farm has for some time been look­ing for op­por­tu­ni­ties to par­tic­i­pate in the large, high-growth Chi­nese mar­ket,” said Gra­ham Al­lan, Dairy Farm’s chief ex­ec­u­tive, in a state­ment to the Lon­don Stock Ex­change when the deal was first re­vealed in Au­gust.

“This strate­gic part­ner­ship with Yonghui pro­vides an at­trac­tive way to do that.”

Ac­cord­ing to the ac­qui­si­tion agree­ment, Yonghui’s prod­ucts will be given ac­cess to Dairy Farm’s dis­tri­bu­tion chan­nels, which will also give the Chi­nese com­pany’s prod­ucts more in­ter­na­tional sales ex­po­sure. DairyFar­m­op­er­ates more than 5,800 su­per­mar­kets and health and beauty stores across Asia.

The two sides have also signed a co­op­er­a­tion agree­ment al­low­ing pre­mi­umWestern goods, nor­mally sold in Dairy Farm out­lets, to be sold in Yonghui stores.

James Roy, as­so­ciate prin­ci­pal at China Mar­ket Re­search Group, said that the buy­out will help Yonghui be­come more com­pet­i­tive.

“Busi­ness of tra­di­tional re­tail­ers is slow­ing down with the rapid rise of e-com­merce. Re­tail­ers have to look into gain­ing big­ger mar­ket share and stronger dis­tri­bu­tion chan­nels by shift­ing on­line.”

Roy said that gro­cery stores par­tic­u­larly are fac­ing chal­leng­ing times as many on­line re­tail­ers, in­clud­ing on­line plat­forms such as Tmall.com, have been share.

With more peo­ple get­ting In­ter­net ac­cess on their com­put­ers, tablets and mo­bile de­vices, e-com­merce will con­tinue to be the big re­tail trend of this year, Roy said.

Yonghui isChina’s fifth-largest hy­per­mar­ket com­pany. It op­er­ates more than 460 su­per­mar­kets in 17 prov­inces and cities in­clud­ing Bei­jing, Shang­hai, Chongqing, Zhe­jiang and Guizhou.

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