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Retailers deny talk of 3b-yuan acquisition

By Diao Ying (China Daily)
Updated: 2007-04-10 10:06

Workers put the finishing touches to a Suning sign in preparation for the opening of the home appliance firm's outlet in Zhengzhou, capital of Central China's Henan Province.

Home appliance chains Suning and Dazhong yesterday denied media reports about a 3-billion-yuan acquisition deal between the two.

Suning Appliance Co Ltd yesterday applied for a temporary halt in trading on the Shenzhen Stock Exchange over concern that the reports may influence its stock price.

A spokesman from Dazhong Electronics said the company doesn't have any intention of being acquired.

The rumor came on the back of several acquisitions by major electronics retailers last year. Best Buy, the biggest consumer electronics retailer in the United States, bought control of China's fourth-largest electronics retailer Jiangsu Five Star Appliance. And the largest domestic retailer Gome purchased its rival China Paradise.

Suning, after Gome, is the second-largest home appliance retailer with a sales volume of 60.9 billion yuan and 520 stores. Dazhong is 25th, with 8.7 billion yuan in sales and 97 stores, according to a list released by the Ministry of Commerce.

Reports of the 3-billion-yuan deal came after Dazhong closed its stores in Chongqing, Nanning and Taiyuan. These local stores were later taken over by Suning.

But Dazhong staff said the closures were part of the company's strategy to focus on the North China market and concentrate on development.

"The 'takeovers' were only to do with the real estate of these stores and the transfer of leasing rights. Apart from that there is no further cooperation between Dazhong and Suning," said Luo Lian, a spokesman for Dazhong.

A Suning staff member said the company doesn't have any acquisition plans.

"Suning has been developing by expanding," said the Suning employee, who did not wish to be named. "There could be some cooperation with other companies, but we won't expand through acquisitions."

Competition has been fierce in China's retail market, which is expected to triple to 20 trillion yuan by 2020. Both domestic and foreign retailers have been trying to gain market share through consolidation.

After purchasing Jiangsu Five Star Appliance, Best Buy plans to open up to 26 stores in the country over the next year, it said in February.

A strategic partnership between Paradise and Dazhong was also broken after Gome bought China Paradise for $675 million last year as part of consolidation in a market with more than 30,000 appliance retailers.

Dazhong is now reportedly in search of a new buyer. Luo from Dazhong said the company has good contacts with domestic players such as Gome and Suning. "But Dazhong hasn't reached any agreement with any company at this stage," said Luo.