Wumart Stores Inc, Beijing's largest supermarket chain, said it will pay 279.5 million yuan (US$35.1 million), or 10 percent more than its initial offer, to speed up its acquisition of the Beijing MerryMart ChainStore Development Co Ltd after the latest audit.

Wumart agreed to pay 253.5 million yuan (US$31.7 million) for 68 percent of MerryMart in February and promised the principal members of MerryMart's management 40 million yuan (US$5 million) in retained profits.

The latest audit of MerryMart's financial records found the retained profits are "very likely" to turn negative, which led to Wumart's higher offer, Wumart said in a statement yesterday.

Meanwhile, Wumart will also contribute another 120 million yuan (US$15 million) to increase the capital scale of MerryMart, according to the agreement drawn up in February. Wumart would control 75 percent of the latter when the deal is completed at the end of this month.

"The acquisition will lower the operating and procurement costs of both companies and underpin the leading position of the group in the Beijing retail market," the company said.

MerryMart, with a chain of 23 supermarkets, is the fourth-largest retailer by size in the Beijing area. Wumart, now the largest chain in the area, had 12 hypermarkets which sell clothes, electronics and groceries as well as 47 supermarkets and 436 mini-marts at the end of 2005.

Wumart expects the deal to help elevate its market share to over 5 percent in the greater Beijing area that includes the city of Tianjin.

"We will continue to expand across the nation this year so as to achieve economy of scale and consolidate our lead in the market," Xu Ying, Wumart's director of finance, told China Daily.

Wumart paid 176.7 million yuan (US$22 million) this April for a 28 percent stake in Shanghai-listed supermarket retailer Yinchuan Xinhua Co. Yinchuan Xinhua operates four department stores and 23 supermarkets in Yinchuan, the capital of the Ningxia Autonomous Region in north central China.

Wumart also plans to spend 500 million yuan (US$62.5 million) opening 20 to 30 new mini-marts and four to five hypermarkets in 2006.

The Hong Kong-listed company raked in 108.9 million yuan (US$13.6 million) in net profit in the first half of the year, up 44.2 percent year-on-year. Its shares have soared 84.6 percent this year, outpacing the 16.5 percent gain of the benchmark Hang Seng Index.

China's home-grown retailers have been expanding aggressively in recent years to fend off overseas rivals such as Wal-Mart Stores Inc and Carrefour SA.

Meanwhile, the nation's rising income and growing middle class is also fuelling demands ranging from overseas electronics to fashionable clothes.

China's retail sales gained 13.7 percent in July over the same period a year earlier and the nation's retail sales have maintained double-digit growth for the past three years.

(China Daily August 22, 2006)