Suning shows little concern over acquisition

HUANG Guangyu, the Chinese mainland's richest individual and owner of Gome Appliance, is eying a merger with rival Suning Appliance Co after acquiring China Paradise last week.

But Suning, the second-biggest home appliance chain in China, yesterday responded coldly to Huang's offer, saying it will not accept such a proposal as it is in a strong position and expanding rapidly.

"Suning is a listed company, so we cannot force minority shareholders to hold their shares, but Gome won't succeed in making our major shareholders sell," said Suning President Sun Weimin yesterday.

Major shareholders including Zhang Jindong -the owner of Suning - and his management team hold a 65.11 percent stake in the listed retailer.

Huang Guangyu on Monday said in Beijing that Suning will be his next target after China Paradise. That was less than one week after Gome Electrical Appliances Holdings Ltd, the Hong Kong-listed unit of Gome Appliance, announced on July 25th it would pay HK$5.27 billion (US$675 million) for China Paradise - the nation's third-largest home appliance retailer.

Gome offered HK$409 million in cash and one new share for every three shares in China Paradise Electronics Retail Ltd. China Paradise was valued at HK$2.24 a share, 9 percent above its current share price in Hong Kong.

The deal gives Gome - already China's biggest home appliance chain - more than 800 stores across the country including Paradise's 193 outlets. The combined company will generate as much as 80 billion yuan (US$10 billion) in sales every year.

But Suning apparently isn't interested in joining the club.

"At least, in terms of company culture, Gome and Suning are too different to become one family," Sun said. "Besides, Suning has an aggressive expansion plan."

The Nanjing-based retailer announced last month that it would shift its headquarters to Shanghai for further development.

Suning has just started large-scale recruiting in Shanghai in preparation for the move.

Suning yesterday posted its mid-year financial report, saying its net profit through June more than doubled from a year earlier after it opened new stores and fine-tuned sales network.

Net profit soared 110 percent to 258 million yuan in the first six months from a year earlier, the retailer said in a statement posted on the Shenzhen Stock Exchange.

Sales climbed 58 percent year on year to 11.2 billion yuan through June, according to the company.

Suning opened 65 stores in the first six months of this year, bringing the total store number to 286 in 78 cities.

The retailer in June raised 1.2 billion yuan from an additional stock sale to finance its store expansion plan across China.