Wumart bags Lotus outlets

A Wumart Stores Inc hypermarket in Shanghai. Provided to China Daily

Wumart Stores Inc, a Chinese supermarket operator, announced on Tuesday that it is proposing to purchase outlets from retailer CP Lotus Corp through a share-swap deal valued at HK$2.89 billion ($372.7 million).

Wumart said that it has signed a framework agreement with Lotus, the flagship retail company in China controlled by the Charoen Pokphand Group of Thailand.

It also said that it will subscribe to shares and convertible preference shares from CP Lotus for HK$547.9 million.

It will pay HK$2.34 billion to take over 36 stores from CP Lotus in Beijing, Shanghai and elsewhere, excluding outlets in Guangdong and Hunan provinces.

CP Lotus agreed to pay HK$2.89 billion for 206.6 million of Wumart's H shares. After the proposed transaction, CP Lotus will own a 13.77 percent interest in Wumart, while Wumart will hold a 9.99 percent interest in CP Lotus, making each company the other's second-largest shareholder.

Xu Ying, president of Wumart Stores, told a news conference in Hong Kong on Tuesday that the transaction will mark the latest implementation of Wumart's expansion and growth strategy.

"It (the transaction) will significantly enhance our presence in the Greater Shanghai region and further strengthen our market leadership in Northern China, which is also consistent with the company's 'go national, but region-focused' strategy," she said.

Xu said after the transaction, Wumart's sales will increase by 46.5 percent (counted as of the 2012 fiscal year) and the number of its stores will increase to 577 from 541 (as of June 30, 2013).

Ed Chan, vice-chairman of CP Lotus, told the news conference that the deal will enable the company to focus on its highest growth areas in Guangdong and Hunan, as well as neighboring provinces that it may enter later. He said that CP Lotus owns 19 stores in Guangdong and Hunan, and that will increase to 22 by the end of this year.