Gome Electrical Appliance Holdings Ltd owns a part of a Shandong Province appliance retailer when it bought over another company that was the original owner of the stake.
The country's biggest electrical retailer spent 541 million yuan (US$75 million) for a 10.7-percent stake in Sanlian Commerce Co Ltd, a major appliance retailer in the province, Sanlian said in a statement to the Shanghai Stock Exchange yesterday.
Sanlian soared by the daily limit of 10 percent to 10.65 yuan per share yesterday on the news after being suspended from trading for three weeks.
Sanlian originally sold the stake to Shandong Longjidao Construction Co at an auction on February 14. Gome then acquired all of Longjidao several days later to become the real owner of the Sanlian stake.
The statement said Gome aims to enhance its sales in Shandong via the acquisition, and become Sanlian's strategic investor. Sanlian can share Gome's market resources while operating independently while Gome won't open franchise stores in the province to avoid competing with Sanlian, the statement said.
Sanlian now runs more than 100 franchise stores and about 10 outlets in the province. It said in a preliminary report that it may post a loss last year, against a net profit of 1.16 million yuan in 2006.
Acquiring existing appliance retailers has been Gome's strategy to grab the lion's share in the Chinese market, while Suning Appliance Co, its rival, chooses to open new stores.
Gome last year gained control of Dazhong Electrical Appliances by financing a 3.65-billion-yuan move by Beijing Zhan Sheng Investment Co.
(Shanghai Daily March 5, 2008)