Conglomerate China Resources Enterprise has agreed to take over two supermarket chains for 410 million yuan as part of its strategy to expand into the Ningbo and Tianjin markets.
With an ambition to be the mainland's largest retailer of consumer products, the red-chip group yesterday revealed two deals - the purchase of a 100 per cent interest in Cixi-based Zhejiang Cikelong Supermarket in Ningbo for 280 million yuan and the entire 28-store chain Yuetan Supermarket in Tianjin for 130 million yuan.
China Resources executive director Francis Kwong Man-him said the deals would immediately boost the profitability of the group's fast-growing retail unit and offer instant penetration into the affluent, but competitive Ningbo market.
'We will be Zhejiang's fourth-largest supermarket chain in turnover terms after the [Ningbo] acquisition,' Mr Kwong told the South China Morning Post. 'The deal fills a key piece in our Zhejiang jigsaw. Our supermarket business in Zhejiang was started only two years ago.'
China Resources, which operates 11 CR Vanguard supermarkets in Hangzhou, Zhejiang, would have 106 stores after taking over 95 Cikelong stores in Cixi, Ningbo's second-largest city.
The acquisition price, at 280 million yuan, represented a price-earnings ratio (PE) of 15.3 times based on last year's unaudited earnings of 18.3 million yuan.
'The prospective PE is much lower as we expect significant turnover and profit growth this year largely from the four new stores opened during the first six months of the year,' Mr Kwong said.
