Supermarket chain Yonghui completes stake sale to fund expansions

Yonghui Superstores Co Ltd, the Fuzhou-based supermarket chain and one of China's Fortune 500 companies, has completed the sale of 5.7 billion yuan ($912 million) worth of shares, around 20 percent, to Dairy Farm International Holdings Ltd to fund various expansions including the setting up of an e-commerce platform.

It is the second time Yonghui has raised funds by selling stock after it went public on the Shanghai Stock Exchange in 2010.

Yonghui said it aims to use the funds to launch further retail outlets, upgrade its store management system, build a series of logistics distribution centers, as well as build an e-commerce platform.

Dairy Farm is an Asian retail giant and a member of the London-listed conglomerate Jardine Matheson Group.

It is buying 813.1 million shares in Yonghui at 7 yuan each as it seeks to further tap China's consumer market.

"Dairy Farm has for some time been looking for opportunities to participate in the large, high-growth Chinese market," said Graham Allan, Dairy Farm's chief executive, in a statement to the London Stock Exchange when the deal was first revealed in August.

"This strategic partnership with Yonghui provides an attractive way to do that."

According to the acquisition agreement, Yonghui's products will be given access to Dairy Farm's distribution channels, which will also give the Chinese company's products more international sales exposure. Dairy Farm operates more than 5,800 supermarkets and health and beauty stores across Asia.

The two sides have also signed a cooperation agreement allowing premium Western goods, normally sold in Dairy Farm outlets, to be sold in Yonghui stores.

James Roy, associate principal at China Market Research Group, said that the buyout will help Yonghui become more competitive.

"Business of traditional retailers is slowing down with the rapid rise of e-commerce. Retailers have to look into gaining bigger market share and stronger distribution channels by shifting online."

Roy said that grocery stores particularly are facing challenging times as many online retailers, including online platforms such as Tmall.com, have been growing market share.

With more people getting Internet access on their computers, tablets and mobile devices, e-commerce will continue to be the big retail trend of this year, Roy said.

Yonghui is China's fifth-largest hypermarket company. It operates more than 460 supermarkets in 17 provinces and cities including Beijing, Shanghai, Chongqing, Zhejiang and Guizhou.