Dalian Wanda has sold 37 department stores to Chinese retailer Suning.com for an amount estimated to be less than RMB 8 billion ($1.18 billion) as China’s largest commercial developer continues a two-year sell off of overseas and non-core assets after being singled out for its debt levels in China’s deleveraging campaign.
Suning’s purchase of the departments stores was first revealed by its chairman, Zhang Jindong, at the Shenzhen-listed company’s Chinese new year gathering on February 12, before being officially confirmed yesterday. At the company event Zhang hailed the deal as “an important step in Suning’s full-scenery retail expansion for 2019 and a representative of its smart retail output capacity.”
The acquisition is the latest in a series of deals by Suning, which has grown in recent years from a home appliance seller into one of China’s largest retailers, thanks to its network of more than 1,600 stores across 700 mainland China cities.
Wanda Sells Department Stores Off the Discount Rack
Suning said that the company had not initially declared the departement store acquisition to the Shenzhen stock exchange as the value did not surpass the legal reporting threshold, which with the appliance retailer’s 2017 net assets declared at RMB 78.96 billion, means that the department stores are worth less than 10 percent of that amount, or under RMB 7.9 billion.
The bargain basement price marks a steep discount to the value that Wanda had once placed on its retail effort.
Wanda Department Store, formerly known as Wanqian Department Store was established in 2007 and, at the time, was regarded as one of Wanda’s four pillar divisions, alongside its commercial real estate, hotel and cultural tourism businesses.
Wanda’s official website previously showed that the group had a total of 99 Wanda Department Stores in Chinese cities including Beijing, Shanghai, Nanjing, Chengdu and Wuhan.
However, in 2015 alone, 56 of Wanda’s stores were closed and Wanda Department Store has since been left out of the group’s financial reports. Today, the group touts its core businesses as commercial property management, cultural industry, real estate and finance on its website.
Suning Expands Relationships with Development Giants
The deal cements a relationship between Wanda and Suning, which is already a significant shareholder in the real estate giant.
Just over one year ago, the Nanjing-based retailer joined with Tencent, JD.com and developer Sunac China to purchase a 14 percent stake in Dalian Wanda Commercial Properties (now Wanda Commercial Management) for RMB 34 billion.
Zhang Jindong’s group also got together with China Evergrande Group, the nation’s third-largest developer by sales, last year in a RMB 20 billion joint venture to develop Suning.com Plazas (苏宁易购广场) to promote Suning’s smart retail services. The retailer has stated a goal of having 300 of these shopping centres by 2020.
That deal with Evergrande, came two months after Suning inked an agreement with rival property giant Country Garden, under which Suning will open 600 stores in Country Garden’s properties.