Suning denies merger deal with Dazhong
Suning Appliance, the mainland's second-biggest electronics retailer, denied reports that it had reached an agreement to buy Dazhong Electronics while confirming the two companies had been in talks.
Shenzhen-listed Suning had agreed to buy Dazhong, the biggest electronics retailer in Beijing, for three billion yuan, the reports said.
Mainland retailers are seeking to consolidate to capture a bigger share of the booming consumer market and hold off expansion by overseas companies such as US-based Best Buy.
Gome Electrical Appliances Holding, which bought third-ranked China Paradise Electronics Retail last year, said a Suning-Dazhong merger would not be possible if Dazhong did not return a 150 million yuan acquisition downpayment it was given by China Paradise in April last year.
China Paradise had agreed to merge with Dazhong before reaching a deal with Gome, the country's biggest electronics retailer.
Dazhong later declared its agreement with China Paradise invalid, arguing that it had breached the terms and conditions by merging with Gome. The dispute is under arbitration.
Gome executive director Du Juan, the wife of chairman Wong Kwong-yu, said yesterday: 'I could not see any room for co-operation in Beijing between Suning and Dazhong before the result of arbitration, and it may be difficult to estimate the time for a result.
'According to legal opinion obtained by China Paradise, the 150 million yuan deposit should be returned if Dazhong insists on selling itself to others.'
Gome, which bought China Paradise last July for HK$5.27 billion in shares and cash, made a net profit of 560 million yuan for the nine months to September last year.
Suning's net profit doubled to 720 million yuan last year.
Gome Electrical Appliances Group, the parent of Hong Kong-listed Gome, now has about 860 stores, Suning 600 and Dazhong 60. Suning aims to operate a chain of 1,500 in the next three years.
Jiangsu Five Star Appliance, in which Best Buy bought a 51 per cent stake for US$180 million in May last year, aims to open 20 to 25 stores in the next 16 months. Jiangsu Five Star has about 140 stores.
