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SCMP Reporter

Beijing supermarket giant to acquire 50 per cent stake in Jiangsu store group

Wumart Stores, Beijing's largest supermarket chain, will buy 50 per cent of Jiangsu Times Supermarket for HK$1.14 billion to become China's No5 retailer.

Wumart said it would pay HK$570.9 million in cash and 24.8 million of new H shares or 7.5 per cent of its expanded equity worth HK$570.4 million to Jiangsu Times' owner CS Investment, according to a statement to the Hong Kong stock exchange yesterday.

The newly issued shares will be priced at HK$23 a share, an 8 per cent discount to the stock's closing price yesterday.

Increasing competition from overseas retailers such as Wal-Mart and Carrefour amid fast economic growth is encouraging Wumart and domestic rivals to expand through acquisitions to boost their share of the mainland's HK$841 billion retail market.

'The acquisition will enable our retail network to expand swiftly in eastern China,' a Wumart statement said. 'We will actively seek opportunities to expand our business and enhance core competitiveness.'

Jiangsu Times runs 45 supermarkets in eastern China and had secured 10 to 12 locations for new stores to increase its floor area by 150,000 square metres  in the next two years, Wumart said.

Wumart has 46 superstores, 221 mini-stores and 257 franchised outlets in Beijing, Tianjin and Hebei.

Jiangsu Times' net profit grew 48 per cent in the first half of this year after recording a HK$61 million net profit last year on  sales of HK$2.78 billion, according to Wumart, which did not give year-earlier figures. Assets at the end of last year  were HK$1.24 billion.

The purchase is the latest in a string of acquisitions by Wumart which last month reported 44 per cent first-half net profit growth to 108.9 million yuan as sales rose 43.5 per cent to 2.6 billion yuan.

In February, Wumart agreed to pay 253.5 million yuan for a 68 per cent stake in MerryMart Chainstore Development, Beijing's fourth-biggest supermarket.

To speed up this acquisition, it increased the offer price by 10 per cent to 279.5 million yuan last month.

Wumart also bought 27.7 per cent of Shanghai-listed retailer Yichuan Xinhua Department Store in April for 176.7 million yuan in a push to expand into northwestern China.

After the latest acquisition, Jiangsu Times' stores outside Zhejiang province will be named 'Times' and those within the province will be named 'Wumart', with the addition of the words 'Member of Wumart Times Group'.

Wumart will appoint four directors to Jiangsu Times' board, with CS Investment also contributing four and management one.

Wumart was previously ranked China's No7 retailer and Jiangsu Times No28, said Lehman Brothers analyst Bo Tan who last month rated Wumart shares 'positive'.

Mr Tan said Wumart Times would be the No5  retailer in China with 4 per cent market share after the acquisition. Trading of Wumart's shares was suspended on August 14 and resumed yesterday. The shares fell 9 per cent to close at HK$25.

STORE UP

Wumart

Ranked 7th largest retailer in China (largest in Beijing)

46 superstores, 221 mini-stores and 257 franchised stores, mainly in Beijing, Tianjin and Hebei province

Due to buy 68% stake in Beijing MerryMart Chain Stores, Beijing's 4th largest retailer

2005 profit 164 million yuan (up 52%), sales 3.9 billion yuan (up 51%)

Jiangsu Times

Ranked 28th

largest retailer in China (2nd largest in Jiangsu province)

17 hypermarkets and 28 supermarkets, mainly in Jiangsu

Due to open 10 to 12 stores in the next two years

2005 profit HK$61 million, sales HK$2.8 billion (growth figures not available)

Wumart-Times will become China's 5th largest retailer



Wumart in HK$1b step to No5 in retail ranks