Gome Electrical Appliance Holdings Ltd's plans to expand its
network in northern China seem to have progressed, with reports
that it has acquired a major stake in a key appliance retailer in
Sanlian Commercial Co Ltd, a major appliance chain operator in
the province, sold 27 million shares, or 10.67 percent, for 537
million yuan (US$75 million) to local firm Longjidao in an auction
on February 14.
However, observers believed there was a string-puller behind
Longjidao, which is a small company with a short history.
Shanghai Securities News quoted an unidentified source as saying
that Gome, the country's biggest electronics retailer, has since
bought the entire stake in Sanlian from Longjidao.
"Longjidao and Gome may have agreed on the deal before the
auction,'' said Xu Wenwu, an analyst with China Galaxy Securities.
"This is exactly the same way Gome acquired Dazhong Electronics
Ltd," he added.
The Shanghai-listed Sanlian runs about 200 chain stores in
Gome may have been targeting Sanlian's sales channel rather than
its shell because it will cost more for a back-door listing, Xu
Acquiring existing appliance retailers has been Gome's strategy
for grabbing the lion's share in the Chinese market.
Its major rival, Suning Appliance Co, has chosen to expand by
opening more outlets. "Both of the two strategies can work well if
the retailers can secure quality operations," Xu said.
Gome last year gained control of Dazhong by financing a
3.65-billion-yuan bid by Beijing Zhan Sheng Investment Co. In 2006,
Gome merged with China Paradise Electronics in a US$680-million
Suning has said it will have about 900 outlets across China by
the end of this year.
(Shanghai Daily February 22, 2008)