Mainland real estate broker 5i5j Holding Group has announced that it will acquire a 100 percent stake in competitor Nanchang Zhonghuan Network Information Service as it seeks to expand its base of operations in China, according to a report in The Paper.
5i5j, which focuses on secondary residential and rental-market brokerage services, will offer a combination of cash and shares to 19 Nanchang Zhonghuan shareholders to complete the deal, although the final price has not yet been determined.
Upon completion of the transaction, Nanchang Zhonghuan, will be a wholly owned subsidiary of 5i5j, boosting the company’s physical footprint by 68 percent. Nanchang Zhonghuan, which was established in 2001, operates 2,400 franchised shops in 17 cities in China, while 5i5j has more than 3,500 storefronts in 16 major communities nationwide.
5i5j to Adopt Franchising Model
5i5j said the acquisition represented “a clear synergy” in terms of market coverage and its business model, adding that the purchase gives it the ability to form a network covering major cities throughout China. 5i5j also said it would apply Nanchang Zhonghuan’s franchising model to its own operations as it expanded.
5i5j in June this year itself saw an ownership shakeup when online marketplace 58 Group, which runs the 58.com advertising website, took an 8.28 percent share of 5i5j for RMB 1.68 billion. 58 Group said at the time that the two business were “very complimentary” in nature.
58.com Chairman Michael Jinbo Yao said his company was trying to develop its online platform to help increase the efficiency of 5i5j’s operations. “The secondary and rental markets have huge growth opportunities, as we expect more new homes to become secondary and rental home transaction inventory in the future,” he said in explaining the stake purchase.
Acquisition Follows Board Changes
5i5j’s acquisition of Nanchang Zhonghuan comes within days of the resignation of company chairman Zheng Xiaohui, for what were said to be “work reasons.” Beijing-based 5i5j has a staff of 50,000 agents across China, according to its website and reaps $1.2 billion in revenue annually via sales commissions.
In addition to the brokerage services it provides in China, 5i5j has also made inroads into the US market, which it says is the top focus for its global ambitions. 5i5j opened its first US office in suburban Chicago in January 2018, catering mostly to Chinese customers seeking investments in the US real estate market.