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The front entrance to a Suning retail store in downtown Chengdu in Sichuan province. Photo: Shutterstock

Embattled retailer eyes private equity assets in turnaround bid as billionaire founder loses grip on group

  • will pay cash, issue new shares for acquisition that will dilute billionaire founder’s control of white-goods retailer
  • Vendor Shenzhen Capital Group claims to be the most successful among mainland China’s private equity and venture capital firms
A-shares, once China’s dominant retailer of home appliances, is planning to buy unspecified assets from a local private equity fund to revive the group, after forays in football clubs and other businesses drained cash.

The firm is holding talks to buy some companies from a fund backed by Shenzhen Capital Group, it said in an exchange filing on Wednesday, without disclosing the details. The purchase will be funded by issuing new shares and partly by cash, it added.

It is the latest move by billionaire founder Zhang Jindong to rescue the firm, as its core business cracked under pressure during the Covid-19 pandemic. Suning posted an annual loss last year, the first since its 2004 listing, as Alibaba Group Holding and dominated e-commerce sales.
Shenzhen Capital Group is controlled by the city’s municipal government and had invested 61.7 billion yuan (US$9.5 billion) in 1,233 projects at the end of January, according to its website. It claimed to be the most successful among venture capital and private equity firms in mainland China in terms of investment exits and taking its investees to public markets.
Chairman Zhang Jindong speaks to the press to announce the purchase of Inter Milan football club, in Nanjing, in June 2016. Photo: AFP

Shares of Suning have been suspended since June 16 pending further announcement on the deal. They last traded at 5.59 yuan in Shenzhen, the lowest in eight years. Its market value has dwindled to 52 billion yuan, a 75 per cent erosion from the peak in 2015.

While Zhang, the company chairman, has been fighting hard to stabilise the group’s finances, he is expected to lose control of the firm he founded in 1990 because the share issue to Shenzhen Capital Group will dilute his holding, according to the exchange filing.

His stake in Nanjing, Jiangsu province-based Suning has fallen below 21 per cent after the sale of a combined 23 per cent stake to Shenzhen International Holdings and Shenzhen Kunpeng Equity Investment Management in March to raise cash.
Suning’s biggest store in Chengdu. Photo: Handout
Zhang, who is worth US$6.6 billion according to Forbes, said at a company meeting early this year that Suning would focus on the retailing business and shed unrelated assets. He disbanded Suning football club that just won the Chinese Super League, and has also asked players to take pay cuts at Inter Milan football club, the Italian Serie A champions which it acquired in 2016.

Of late, Suning and its affiliates have also been entangled in a liquidity crunch. Zhang will need to sell up to 383.5 million shares, or a 4.1 per cent stake, in Suning in the coming months for running afoul of a share-pledge agreement, according to an earlier exchange filing in May.

Its property unit has had to come out and deny market rumours that it would file for bankruptcy next month, and that Suning’s online and logistic operations would be taken over by Alibaba, the owner of this newspaper.

This article appeared in the South China Morning Post print edition as: to buy assets from Shenzhen private fund to revive business