Dazhong Electrical Appliance, China's fifth-largest electronics retailer, yesterday said it had unilaterally cancelled an agreement to be acquired by China Paradise Electronics Retail after the No3 appliance chain agreed to be taken over by market leader Gome Electrical Appliances Holding late last month.
In April, China Paradise paid Dazhong 150 million yuan for the right of first refusal to buy the Beijing-based retailer's chain of 60 stores.
As late as Monday, China Paradise executives were still insisting the deal would proceed although Gome's HK$5.27 billion purchase of Shanghai-based China Paradise last month had already raised doubts over whether Dazhong would honour the agreement.
'Our negotiations with Paradise were conducted in the spirit of friendly co-operation and equality but the merger of Paradise and Gome clearly infringes on the basis of this agreement and so we decided to formally cancel it,' a Dazhong spokeswoman said yesterday. 'We have sent a letter to Paradise to let them know of the cancellation and we are waiting for their reply.'
A China Paradise spokeswoman said the company's merger with Gome did not breach the terms of its contract with Dazhong and that it was talking to its lawyers about how to recover its 150 million yuan cash deposit.
Dazhong said it was also talking to lawyers to see whether it must return all, none or part of the deposit.