Nanjing-based retailer Suning.com on Sunday disclosed that its majority owner Zhang Jindong, as well his affiliate companies, are selling a 23% stake of the company to two Shenzhen-based state-owned companies in a RMB 14.8 billion (USD 2.3 billion) deal.
Zhang himself will lower his direct stake from 20.96% to 15.72%, remaining the single largest shareholder. Suning Holdings and Suning Home Appliance Group will lower their stakes from 16.8% to 5.45% and from 3.99% to 0.66% respectively. Zhang controls more than 51% of Suning Holdings and 50% of Suning Home Appliance, according to market intelligence provider Tianyancha.
The buyers, Shenzhen municipal government-owned Kunpeng Capital and Shenzhen International Holdings will hold a 15% and 8% stake respectively. Previously, the market speculated that state funds of Jiangsu, where Suning is headquartered, might be the acquirers. Suning’s Shenzhen-listed stock jumped 10% to RMB 7.7 on Monday.
Zhang, Suning Holdings, and Suning Home Appliances in the past several months pledged their shares in Suning.com to banks and Alibaba’s Taobao as collateral for loans, according to company filings and media reports. The liquidity problems emerged after Zhang did not ask for repayment of a RMB 20 billion strategic investment in real estate developer Evergrande, Bloomberg reported in November last year.
“There could be changes in Suning.com’s strategy and management since the incoming investors hold a very large stake,” said Zhuang Shuai, a retail veteran and founder of Bailian Consulting.
Zhao Baodong, a Shenzhen-based lawyer with Beijing DHH Law Firm, told KrASIA on Monday that to exert control, an investor doesn’t need more than 50% of the shares. With 30% of the voting power, someone can already decide over half of the appointments for the board, or influence the shareholder meeting to take a decision.
Pandemic hits results
Suning generated RMB 3.9 billion (USD 600 million) in net losses, according to its annual report released on Saturday. In 2020, the company sold goods worth about RMB 416.3 billion (USD 64.4 billion), 70% of which have been online, as brick-and-mortar sales got hit due to the pandemic. In comparison, Pinduoduo reported sales of nearly RMB 1.46 trillion (USD 214.7 billion) in the 12 months ended September 30, 2020.
Before COVID-19 hit China, Suning.com bought an 80% stake in loss-making Carrefour China for RMB 4.8 billion (nearly USD 700 million) in June 2019 and 37 department stores from commercial property group Wanda at an undisclosed price in February of the same year.