Caixin
Mar 01, 2021 08:32 PM
BUSINESS & TECH

State Comes to the Rescue of Former Retail Superstar Suning

Electronics retailer Suning.com announced a $2.3 billion share sale that will hand over nearly a quarter of the company to state-controlled entities, amounting to a state-led bailout for a former retail pioneer that has fallen on hard times.

Investors enthusiastically greeted the ownership transfer, which was first announced last week with no names given, by bidding up shares of the Nanjing-based company by the daily 10% limit in Monday trade. 

The reshuffle will see four of the five largest shareholders in publicly listed Suning.com Co. Ltd. sell a combined 23% of the company’s shares to two state-owned investment bodies in Shenzhen for 14.8 billion yuan ($2.3 billion), according to a filing to Shenzhen Stock Exchange Sunday.

Suning.com’s billionaire founder Zhang Jindong, the company’s largest shareholder with 20.96% of the company, will sell down his stake to 15.72%. At the same time, Suning Holdings Group, in which Zhang holds a 59% stake, will sell down its stake to 0.66% from a current 3.98%. Suning Appliance Group will see its stake drop to 5.45% from a current 16.8%, while Tibet Trust will sell its entire 3.07% stake.

SUNING chart-1

The net effect of the sales will see Zhang’s position in Suning.com drop to 16.38% from a previous 24.94%, making him the company’s second largest shareholder.

Shenzhen International Holding Ltd. and Shenzhen Kunpeng Equity Investment Management Co. Ltd., both under the State-owned Assets Supervision and Administration Commission (SASAC) of the Shenzhen government, will acquire 8% and 15% of the listed company’s shares, respectively, for 5.2 billion yuan and 9.7 billion yuan. The transactions are based on a share price of 6.92 yuan per share, representing the average level over the past 60 trading days.

The series of sell-downs will leave Taobao (China) Software Co. Ltd, a unit of e-commerce giant Alibaba Group Holding Ltd., as the company’s largest shareholder with a 19.99% stake. Alibaba made the purchase in 2015 for 28.3 billion yuan, though the investment has lost more than half of its value since then.

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Tip Sheet: Struggling Former Retail Champ Suning Looks for State Support 

Concurrent with the share sales, Suning.com also said it plans to build a South China headquarters in Shenzhen, where its two new major shareholders are based. Those new shareholders will use their local resources to enhance Suning.com’s market presence in the affluent South China region.

Shenzhen International Holding is 43.39% controlled by Shenzhen SASAC and mainly manages logistics infrastructure projects and services, and constructs toll highways in South China’s Greater Bay Area of which Shenzhen is a central part. Its Hong Kong-listed shares jumped 4.9% Monday before giving back all of those gains and closing down about 2%.

Shenzhen Kunpeng Equity, an investment management company that helps to fund the city’s industrial development and construction projects, is fully owned by Shenzhen SASAC.

The sales come as the Nanjing-headquartered enterprise faces mounting pressure amid a lackluster financial performance. In the first three quarters of last year, Suning.com’s net profit fell by 95% to 547 million yuan. The retail giant, operating one of the country’s biggest chains of stores, has a strong presence in both the online and offline realms nationwide.

But despite years of effort, Suning.com has yet to make a major dent in the Chinese e-commerce market and now is a distant fourth with 5% share or less. By the end of September last year, it had closed more than a quarter of its brick-and-mortar stores, even as China’s pandemic came under control, as more Chinese consumers shopped online. The company has had negative cash flow from operations since 2017, mostly using borrowed funds to fill the gap, according to financial data provider Tonghuashun.

Suning said it expects the inclusion of the two new Shenzhen investors to improve its business in logistics services, supply chain capabilities and tax-free retailing businesses.

Contact reporter Anniek Bao (yunxinbao@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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