Shares in Chinese online retailer soar after it announces $1.36-billion deal to sell 17% stake to Alibaba, Xiaomi and local government fund; group faces large bond debts that must be repaid later this year
(AF) Shares in Chinese Suning.com soared by a maximum 10% on Tuesday after the loss-incurring online retailer announced a $1.36 billion state-backed bailout that counts Alibaba Group and Xiaomi as investors, easing investors’ liquidity concerns.
Suning.com’s chairman and biggest shareholder, Zhang Jindong, along with several other major shareholders, will sell a combined 17% stake to a local government-led fund, according to an exchange filing.
Alibaba, which already owns roughly 20% of Suning.com through its Taobao unit, is an investor in the fund, as are major electronics makers Haier, Midea, TCL and Xiaomi.
The 8.8-billion yuan ($1.36-billion) deal, which the company said will leave it without a controlling shareholder, comes amid concerns over cash flow at Suning.com and its parent company, Suning Group.
“On the surface, the stake sale will introduce new shareholders from Suning’s value chain to help solve its liquidity issues. But a deeper look reveals that this will fundamentally change Suning’s retail model, and help it to integrate online and offline businesses and collaborate with companies across its value chain,” Lin Huanyu, an analyst from Huatai Securities, said.
After the restructuring, Suning.com will no longer be plagued by the liquidity problems of Suning Group, and will be able to better focus on its core business, Lin said.
$2.44 bn in debt due this year
Suning.com, which forecast a net loss of up to 3.2 billion yuan in the first half, needs to repay 15.8 billion yuan ($2.44 billion) worth of bonds this year.
Suning’s financial pain is partly self-inflicted. As one of China’s biggest electronics retailers, the $8 billion company led by Zhang Jindong went on an aggressive buying spree in recent years, snapping up Carrefour’s Chinese business, as well as football clubs Inter Milan and a now-defunct local team. In 2017, Zhang even led a consortium to invest in embattled property developer Evergrande.
The acquisition spree was characteristic of a group of Chinese conglomerates, among them HNA Group, Dalian Wanda Group and Anbang Insurance Group, which have now been forced to unwind investments to repay debt or accept government control.
Suning.com’s shares were halted on June 15, after a Beijing court froze a quarter of Zhang’s shares in response to a lender demanding early repayment of a loan. The stock jumped the maximum 10% after trading resumed on Tuesday.
Suning.com said on Tuesday that the new funds, led by the government of Jiangsu Province and the city of Nanjing, will actively support its stable and healthy development. It said the local governments will provide emergency credit support as necessary.
With reporting from Reuters