Wumart buys stake in food retailer

PUBLISHED : Thursday, 22 April, 2004, 12:00am
UPDATED : Thursday, 22 April, 2004, 12:00am

Beijing supermarket chain Wumart Stores has made its first acquisition since listing on the Growth Enterprise Market in November last year, agreeing to buy a stake in Beijing Chaoshifa in a bid to strengthen its income base.

Trading in the shares of Wumart was suspended yesterday, pending an announcement of the acquisition. Wumart shares ended at $12.20 on Tuesday.

A source confirmed that Wumart had signed an agreement to buy a stake in Chaoshifa, which operates 50 supermarkets in Beijing and is ranked as one of the top 10 food retail chains in the city. However, no details about the deal were available.

'The amount of capital involved in the acquisition will be in line with our earlier plans to allocate $200 million to $300 million for expansion this year,' the source said.

The Beijing Youth Daily yesterday reported that Wumart planned to buy 25 per cent of Chaoshifa.

Two months ago, Wumart said it intended to add 156 stores to its operations this year, mainly in Beijing, amid rapid growth in the mainland's retail market.

The expansion will increase Wumart's retail operations to 506 stores, including supermarkets, convenience stores, hypermarkets and drug stores.

With combined cash in hand and a bank balance of $571 million, Wumart earlier said the capital was sufficient to aid its expansion programme.

It is believed that rival Lianhua Supermarket Holdings, the largest supermarket chain on the mainland, was also one of the suitors for Chaoshifa.

In February, Wumart said net profit jumped 161 per cent to 71.59 million yuan for the year to December.

Turnover climbed 43 per cent to 1.57 billion yuan, of which 72 per cent came from supermarket operations.

Net profit margins reached 4.55 per cent last year, 2.05 per cent higher than 2002.