CP Group seeks China foothold

Dhanin Chearavanont, chairman and chief executive of agro-industrial conglomerate Charoen Pokphand Group, said on Wednesday he believed the latest partnership with Wumart Stores Inc, the Chinese supermarket operator, will help establish the group's retail business in China.

Dhanin: synergy ensures growth

"Wumart is currently strong in the local market in China where the economy is expected to see continued strong growth. Business synergy between the firms will help ensure the group's business growth in line with China's economic expansion," he said.

"In our business expansion plan, Wumart will be tasked with handling expansion in South China, while CP Lotus Corp focuses on expansion in the North."

Wumart Stores said yesterday it will buy stores from CP Lotus Corp in Beijing, Shanghai and other cities for HK$2.3 billion (9.3 billion baht) through a stock swap to expand in northern China.

As part of the deal both companies will take minority stakes in each other. CP Lotus, partly owned by a unit of Dhanin's Charoen Pokphand Group, will keep some outlets in southern China. A slowing economy and rising competition are encouraging consolidation in China's retail industry. Tesco Plc announced a joint venture earlier this year with China Resources Enterprise Ltd that will see it merge its more than 130 stores in China with the Hong Kong-listed company.

CP Lotus operates 57 retail stores under the Lotus brand in China, and reported a loss of 392 million yuan (US$64 million) last year.

The CP unit that owns the stores being sold also had net debt of 434 million yuan as of June 30. As part of the transaction, Wumart will gain a stake of about 10% in CP Lotus worth HK$548 million, while CP Lotus will obtain 14% of Wumart valued at HK$2.9 billion.

Beijing-based Wumart's net income rose 2.7% to 602 million yuan last year. As of June 30, it had a retail network of 541 stores, with 145 superstores and 396 mini-marts. Wumart held a 1.8% share in China's hypermarket industry in 2012 and Charoen Pokphand Group had 2.3%, reported Euromonitor International. The two compete with Wal-Mart Stores Inc, China Resources and Sun Art Retail Group Ltd in the country.