China fresh

13 August 2014 By Una Galani Follow @ugalani

The Asian conglomerate’s retail arm is buying nearly 20 pct of Chinese supermarket chain Yonghui for $925 mln. Minority stakes are usually best avoided. But retailers like Tesco have destroyed value trying to crack the Chinese market alone. A more cautious approach is justified.

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Singapore’s Dairy Farm announced on Aug. 11 an agreement to acquire 19.99 percent of China’s Yonghui Superstores for 5.69 billion yuan ($925 million). The deal is the largest acquisition by the retailer, which is part of the Jardine Matheson empire.

The pan-Asian retailer will buy new shares in the Shanghai listed group at a price of 7 yuan per share, a 4 percent discount to the closing price on Aug. 6.

Dairy Farm and Yonghui also entered into an agreement to cooperate in a range of areas, including procurement, private label products, producing fresh food, and store development.

As part of the deal, Dairy Farm will have the right to nominate two directors to the board of Yonghui and one member to its supervisory board.

The deal requires the approval of Yonghui’s shareholders, of which 40 percent have already agreed to vote in favour of the deal. Chinese regulatory approval is also required.

Dairy Farm is 77.6 percent owned by Singapore-listed Jardine Strategic Holdings, which is part of Jardine Matheson Holdings.

Shares in Dairy Farm rose 2.3 percent on Aug. 12. Shares in Yonghui rose 10 percent.

Context News

The pan-Asian retailer will buy new shares in the Shanghai listed group at a price of 7 yuan per share, a 4 percent discount to the closing price on Aug. 6.

Dairy Farm and Yonghui also entered into an agreement to cooperate in a range of areas, including procurement, private label products, producing fresh food, and store development.

As part of the deal, Dairy Farm will have the right to nominate two directors to the board of Yonghui and one member to its supervisory board.

The deal requires the approval of Yonghui’s shareholders, of which 40 percent have already agreed to vote in favour of the deal. Chinese regulatory approval is also required.

Dairy Farm is 77.6 percent owned by Singapore-listed Jardine Strategic Holdings, which is part of Jardine Matheson Holdings.

Shares in Dairy Farm rose 2.3 percent on Aug. 12. Shares in Yonghui rose 10 percent.

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