Bain Capital May Buy Stake in a Major Chinese Retailer

 

SHANGHAI — Bain Capital, the private equity firm, is planning to invest as much as $400 million to acquire a minority stake in Gome Electrical Appliances, one of the biggest retailers in China, according to people with knowledge of the talks.

The deal, which could be announced as early as Tuesday, would be one of the largest American investments in a Chinese company and could help stabilize a consumer electronics giant that was recently rocked by scandal.

The founder of Gome, Huang Guangyu, was recently listed as the richest man in China, worth an estimated $6 billion. But last November, he was arrested on corruption charges, and China’s state-controlled media reported he was being held for “economic crimes.”

Mr. Huang, 39, still owns a substantial stake in the company but has since been removed as chairman.

To shore up its finances and restore confidence, Gome has been seeking outside investors. Bain, which has headquarters in Boston, was one of those bidding to take a stake in the company, according to people with knowledge of the talks.

A person who answered the telephone at Bain Capital’s Hong Kong office Monday said no one was available to speak to the media. A Gome spokeswoman said the company declined to comment.

But people with knowledge of the talks say Bain could take a 16 percent stake this week and also take several board seats.

Gome has 739 outlets in China and in 2008 generated revenue of $6.7 billion.

Gome stock plummeted more than 70 percent last year, and trading was suspended in Hong Kong after Mr. Huang’s detention. Trading in shares of the company is still suspended.

Analysts say the company is strained for cash and has a large debt payment coming due in 2010.

The fate of Mr. Huang is still uncertain. But state-controlled news media in China have reported in recent months that several high-ranking officials in the southern province of Guangdong have been arrested because of involvement in the case.

The South China Morning Post reported that the mayor of Shenzhen, one of the country’s fastest-growing cities, had been detained in connection with the investigation into Mr. Huang.