image

Mergers & Acquisitions

Explainer: the four big Chinese firms investing in shopping centre operator Wanda, and why they did it

Tencent Holdings, JD.com, Sunac China Holdings and Suning Commerce Group spent a combined US$5.4 billion for a total 14 per cent stake in Wanda Commercial

PUBLISHED : Tuesday, 30 January, 2018, 7:05pm
UPDATED : Tuesday, 30 January, 2018, 7:56pm

Four of China’s biggest companies – Tencent Holdings, JD.com, Sunac China Holdings and Suning Commerce Group – have invested a combined 34 billion yuan (US$5.4 billion) for a total 14 per cent stake in Wanda Commercial, the country’s largest owner and operator of shopping malls and part of the Dalian Wanda Group led by billionaire Wang Jianlin. Who are the four and why did they put up the money?

Tencent goes old school as it leads US$5.4b investment in Wanda Commercial Properties

Tencent Holdings: it is second time of asking for the social media and gaming giant, which led the investment with 10 billion yuan (US$1.6 billion) that got it a 4.12 per cent stake. Tencent had tried to forge an e-commerce joint venture with Dalian Wanda Group in cooperation with internet firm Baidu in 2014 as it went head to head with e-commerce firm Alibaba Group Holding for a slice of the growing pie of China’s rising middle-class consumption. But the deal fell apart in less than two years, with Wanda later saying that Tencent and Baidu did not pay their shares of the initial 5 billion yuan investment.

For Tencent, the latest investment “would be good value for money” as Wanda is still struggling to regain its momentum, said Zhu Wei, an associate professor at the China University of Political Science and Law. Its investment would also benefit Wanda in terms of branding and winning trust from consumers and government, Zhu said.

“By bringing Tencent on board, Wanda will not only benefit from a strong online consumer base, but will also be able to share risks – no matter whether economic or political, with China’s most flamboyant new economy representative,” he said.

Tencent bets China’s shopping malls can be fashionable again as it leads $5.4 billion Wanda deal

JD.com : the e-commerce giant spent 5 billion yuan for a 2 per cent stake in Wanda Commercial. JD does not have a track record of cooperation with Wanda, so it is likely that it is joining the investment alongside Tencent, with whom JD has previously co-invested in retail firms to challenge Alibaba’s predominance in e-commerce.

JD said in a statement that it would work with Tencent and Wanda to leverage smart technology to cut costs and boost the efficiency and customer experience of offline retail. “While Tencent knows people best, JD knows products best, and Wanda knows space best,” it said.

Wanda wants US$5b from single buyer for five offshore assets

Tencent and JD have both invested in supermarket chain Yonghui Superstores and in December announced a US$863 million joint investment in online fashion retailer Vipshop.

Sunac China Holdings: the only real estate company among the four investors, it spent 9.5 billion yuan for a 3.91 per cent stake in Wanda Commercial.

Sunac’s chairman, Sun Hongbin, has close personal ties to Wanda’s Wang, having come to his rescue when Wang needed to dispose of his domestic tourism assets last July after a government crackdown on aggressive acquisitions by top conglomerates. The regulatory pressure sent Wanda’s bonds and shares tumbling, precipitating a cash crunch that forced Wanda to sell its hotels. Sun’s Sunac was the buyer, paying US$2.9 billion for the projects eventually and soothing Wanda’s cash flow problems.

The stake could be positive for Sunac, analysts said.

Here’s what’s in Wanda and Sunac after China’s largest single property deal

“For Sunac, being a shareholder of Wanda Commercial could give it access to Wanda’s commercial properties. Many developments now require certain parts to be for commercial use, so this would help Sunac,” said Liu Feifan, a property analyst at Guotai Junan International Holdings

Suning Commerce Group: the retailer spent 9.5 billion yuan to join the investment, but already has a long history of cooperation with Wanda.

Wanda’s Wang and Suning chairman Zhang Jindong are old acquaintances, both have served as members of the Chinese People’s Political Consultative Conference, the country’s top consultative body. In 2015, Wanda and Suning signed an agreement under which Suning would open stores in Wanda malls.

Then in December last year, Wang was invited to Suning’s business partner event and delivered a speech, saying that Wanda planned to tailor-make bricks-and-mortar stores for Suning and to develop restaurant and entertainment amenities around Suning stores. He also said the two would collaborate in capital investments.

However, Alibaba Group is the second-largest shareholder in Suning, with a 20 per cent stake, raising questions over how the e-commerce firm may react to Suning teaming up with its rivals.

Alibaba owns the South China Morning Post.

business-article-page