Hugo Lam’s Best Mart 360 to Sell 49% Stake to State-Owned China Merchants Group

Best Mart 360, the Hong Kong retail chain controlled by local property investor Hugo Lam (Lin Tsz Fung), revealed this week that it had entered into a tentative deal to sell a 49 percent stake in the company to state-owned conglomerate China Merchants Group.

Lam, who is the company’s co-founder, executive director and chairman, joined co-founder Hui Ngai Fan in signing a memorandum of understanding on Wednesday to sell 490 million shares in Best Mart 360 Holdings to a China Merchants subsidiary, according to a filing that same evening with the Hong Kong stock exchange.

The value of the deal wasn’t disclosed, but the stake is worth close to HK$1 billion ($130 million) on the basis of Best Mart 360’s last closing price of HK$2.02 before the announcement. The stock was trading at around HK$2.50 as of Friday afternoon, ballooning the company’s market capitalisation to HK$2.5 billion.

“As at the date of this announcement, save as the MOU, no formal or legally binding agreements have been entered into in respect of the possible transaction, and negotiation thereof is still in progress and the possible transaction may or may not proceed,” Lam said in the filing. He gave no rationale for the potential share sale.

Snack Empire Drew Rage

Known for selling snack food, Best Mart 360 operated 130 stores in Hong Kong, six in Macau and two in mainland China as of March, according to the company’s latest annual report. The typical saleable area of the chain’s retail stores ranges from 515 to 2,626 square feet (48 to 244 square metres).

Best Mart’s Hong Kong stores were attacked during the 2019 anti-government demonstrations over Fujian native Lam’s alleged ties to Fujianese gangs that were accused of roughing up protesters. By November 2019, 75 of the chain’s stores in the city had been vandalised, the South China Morning Post reported, citing company figures.

Lam denied any links to the gangs and told local media at the time that Best Mart 360 was seeking to expand in Macau and the mainland to reduce its dependence on Hong Kong. Best Mart opened its first two mainland stores, both in Shenzhen, last year.

“The group will actively explore successful profit models and apply them to other cities within the Greater Bay Area to accelerate its presence in the Greater Bay Area and extend its sales network to the whole nation,” the company said in its annual report.

Avid Buyer in Selling Mode

A prolific buyer of Hong Kong real estate, Lam emerged as the seller of a shopping complex in the New Territories to China Resources Group for HK$1.36 billion ($170 million) in a deal disclosed in June.

The transaction for Wan Tau Tong Square in Tai Po was the largest of a stand-alone Hong Kong shopping centre since December 2017, when Fortune REIT sold the Provident Square mall in North Point for HK$2 billion.

The Wan Tau Tong disposal made Lam one of the rare players to profit from a retail asset sale in recent months and came four years after he teamed up with Hong Kong-listed Asia Cassava Resources to purchase the Queen Central commercial building in Sheung Wan for HK$1.1 billion.

That 2018 acquisition took place less than a month after Lam had snapped up an industrial site at 41 King Yip Street in Kwun Tong for HK$1.6 billion.