Jardine-Backed Yonghui Buys Controlling Stake in Wuhan Retailer for RMB 559M

Jardine Matheson-backed Yonghui Superstores is to become the controlling shareholder in central China regional supermarket chain Zhongbai Holdings Group in a deal valued at RMB 559 million ($83.2 million), according to a Shanghai Stock Exchange filing.

Yonghui is offering RMB 8.10 per share to raise its stake in Wuhan-based Zhongbai to 40 percent from 30 percent in a deal worth RMB 559 million, the tech-enhanced retailer said in a statement dated April 12th.

Jardine Matheson executive chairman Ben Keswick was named chairman of Yonghui Superstores in December last year, and this latest transaction comes less than six months after Yonghui formed a $1.2 billion joint venture with a unit of CK Hutchison Holdings and Tencent, which was already a shareholder in the grocery retailer, to expand the company’s Greater China footprint.

Yonghui Buys Out State Interest

Yonghui is buying its new set of shares in Zhongbai, which operates 1,255 stores, primarily in central China, from a unit of the Hubei branch of China’s State-owned Assets Supervision and Administration Commission, giving the buyer control of Zhongbai’s array of discount superstores, premium supermarkets, convenience stores, neighborhood fresh goods stores, imported products wholesale centres and food markets.

Yonghui, which was founded in 2001 by brothers Zhang Xuanning and Zhang Xuansong, sold a nearly 20 percent stake to Dairy Farm International, the Asian retail arm of Jardine Matheson, for $925 million in 2014. The company explained that it is optimistic about Zhongbai’s future prospects and confident that synergies between the Wuhan firm and its existing holdings would boost the value of the acquired assets.

The acquisition, which Yonghui is managing through its own funds, will immediately boost its market share in Hubei, where it currently has only outlet in the province, while expanding it range of retail formats and boosting its footprint nationwide.

In 2016, Dairy Farm maintained its percentage in Yonghui as it paid $190 million for new shares in the mainland retailer offered through a private placement. JD.com took a 10 percent stake in the company via the same share sale.

Going With the New Retail Wave

This latest agreement allows Yonghui to continue building on its 29.86 percent stake in Zhongbai, which began with the purchase of a 4.99 percent holding in 2014. As of June 2018, Yonghui operated a network of more than 950 supermarkets in 22 provinces, with Guangdong being a major focus of its network.

As competition has increased in mainland retail the company has been adopting online strategies to stay competitive, driven by a technology-led “new retail” concept.

In addition to its relationship with JD.com, in January 2018, Yonghui joined tech giant Tencent, which holds a five percent stake in Yonghui Superstores and a 15 percent interest in Yonghui’s fresh food market unit, Super Species, to take an unspecified stake in Carrefour’s China unit.

In October the same year, Yonghui formed a RMB1.2 billion ($170 million) grocery joint venture with Tencent and Hong Kong’s ParknShop, a division of CK Hutchison Holdings to enlarge its footprint in the southern province of Guangdong.

In December 2018, Yonghui acquired a 1.5 percent stake in Dalian Wanda Commercial Management Group for RMB 3.5 billion.