Efforts by Chinese supermarket chain Yonghui Superstores to increase its stake in another Chinese retailer have met resistance, possibly due to national security concerns.
Yonghui has signed a memorandum of cooperation with Wuhan State-Owned Assets Management Ltd. Co., agreeing to drop its previous plans to become the biggest shareholder of retailing peer Wuhan-based Zhongbai Holdings, Yonghui said in a statement on Tuesday.
Wuhan State-Owned Assets Management is wholly owned by Wuhan State-Owned Assets Supervision and Administration Commission, which has a 34.9% stake in Zhongbai, making it the biggest shareholder. Yonghui is the second-biggest shareholder with a 29.9% stake, according to public data.
The memorandum of cooperation was signed after negotiations held at the request of China’s National Development and Reform Commission (NDRC), according to the statement.
Despite abandoning the stake acquisition plan, Yonghui will be entitled to nominate candidates for the general manager post at Zhongbai, while Wuhan State-Owned Assets Management will be able to nominate candidates for the role of Zhongbai chairman, the statement said.
In a separate statement Zhongbai confirmed that Yonghui had dropped its acquisition plan.
Last month, Yonghui said in a statement that the NDRC had launched a national security investigation into its proposal to increase its stake in Zhongbai to 40% from 29.9%. It is rare for the commission to cite national security concerns when reviewing deals between companies in China’s retail sector.
Dairy Farm, a subsidiary of British conglomerate Jardine Dairy Farm, which itself is a subsidiary of British conglomerate Jardine Matheson, is the biggest shareholder of Yonghui, with a 20% stake in the company. Internet giant Tencent is also a shareholder with a 5.05% stake.
Contact reporter Ding Yi (email@example.com)