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SCMP Reporter

Lianhua Supermarket Holdings, one of the mainland's largest supermarket chain operators, has agreed to buy crosstown rival Hualian Supermarket for  491.75 million yuan (HK$557.64 million) from  their parent company, Bailian Group,  in an effort to cut procurement costs and expand its franchise business.
Lianhua will acquire a 99.4 per cent stake in Hualian from Bailian for 488.8 million yuan, while  subsidiary Lianhua Supermarket Development will take  the remaining 0.6 per cent for 2.95 million yuan, Lianhua said in a statement yesterday.  
It will pay for the acquisition in cash. 
The deal reflects Bailian's efforts to consolidate the supermarket sector under its empire as the Chinese retailing giant strives to maintain Lianhua's leading position nationwide.
'The larger scale of procurement will help increase the company's  bargaining power when negotiating with its suppliers,' the statement said. 
'The retail chain franchise business of the company will be improved significantly.'
Lianhua now owns more than 3,000 outlets, including supermarkets, hypermarkets and convenience stores, nationwide. 
After the acquisition, the number will jump to more than 5,200.
In 2003, Shanghai created state-owned retail conglomerate Bailian, which controlled the city's four largest retailers, including Lianhua and Hualian, amid growing competition from foreign and domestic rivals.
Early this year, Bailian shelled out 1.05 billion yuan to buy 131.7 million shares, or 21.2 per cent of Hong Kong-listed Lianhua, from Shanghai Industrial Holdings, a municipal government-owned arm.
Bailian now holds 55.2 per cent share of Lianhua.
In February, Industrial and Commercial Bank of China, the mainland's largest lender, extended loans of 400 million yuan to Bailian to fund the purchase.  
After the consolidation, Lianhua will speed up its expansion in the Yangtze River Delta and open more franchise outlets in neighbouring Zhejiang and Jiangsu provinces, the statement said.
The deal is still subject to approvals by government authorities, it added.
Cash-only transaction
To acquire Hualian from their parent company, Lianhua will pay, in yuan: 492m yuan



Lianhua to buy rival supermarket chain Hualian from their parent