Wumart in talks to sell 10% stake
Updated: 2007-07-16 10:57
Wumart Stores, the largest supermarket chain in Beijing, has reopened discussions with interested buyers on a scaled-down deal that could see the retailer sell a stake of about 10 percent, market sources said.
The reduction in size from an earlier transaction, which could have reached up to a controlling stake, had basically led major foreign buyout funds such as Blackstone, Kohlberg Kravis Roberts and Bain to walk away, sources said.
Domestic private equity funds including Citic Capital and CDH Investments as well as mainland asset management companies were more likely to take a stake as the offer stood, market sources said.
Fu Yu, a spokesman for Wumei Holdings, which owns 40.8 percent of Growth Enterprise Market-listed Wumart Stores, said he had no knowledge of a deal.
Wumart's market capitalisation stands at about US$1 billion, making a 10 percent stake worth about US$100 million.
Wumart is less interested in ceding control now that an investigation into the company, its founder Zhang Wenzhong and his family was winding down, sources said.
The regulator in November began an investigation into how the founder financed the beginnings of the company in 1994. Mr Zhang resigned as chairman but remains an executive director.
Wumart in a statement last month said it was conducting its own investigation "to ascertain whether there was any misappropriation of company assets" and would inform both the Hong Kong stock exchange and shareholders of the results.
The statement also said that shares of the company, which have been suspended from trading since November 13, would resume trading but gave no date.
Wumart scrapped a US$86 million share placement in Hong Kong in November after the scandal broke. Newly appointed chairman Wu Jianzhong said at the time the company was looking into other fund-raising options.
British investment bank Cazenove has introduced interested strategic investors to the company over the past month, but received no formal mandate to find investors, said a person familiar with Cazenove. However, it appears other funds approached Wumart on their own.
"Investors want to get in there before the resumption of trading," said one source. "The stock hasn't appreciated like every other retailer so there is unlocked value there."
Wumart's shares last traded at HK$6.88. Shares of Lianhua Supermarket Holdings, the largest grocery store chain in the mainland, have risen 27 percent since November, when Wumart's shares were suspended, outpacing the 22 percent gain of the Hang Seng Index.
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