Bailian consolidates China’s largest supermarket operations

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CHINA – The Bailian Group is merging its supermarket businesses, with subsidiary Lianhua Supermarket Holdings buying over Hualian Supermarket, another Bailian unit, for CNY488.8 million.

Lianhua has announced that it is buying 99.4% of the shares in Hualian from parent company Bailian Group for CNY488.8 million in cash while Lianhua Supermarket Development, a subsidiary of Lianhua, would take the remaining shares for CNY2.9 million in cash from fellow subsidiary Bailian Real Estate.

Lianhua, already the largest supermarket retailer in China, will have 5,268 stores in the Mainland, including Hualian’s 1,946 outlets.

Owned by the Shanghai municipal government, the Bailian Group is a major conglomerate principally engaged in businesses relating to domestic trading, provision of production information, logistics and development of commercial properties; Bailian Real Estate is its real estate development and property management arm. Hualian is one of the biggest supermarket operators in China, and was directly owned by Bailian Group and Bailian Real Estate prior to the acquisition

Lianhua, a subsidiary of Bailian, is one of the largest retailers in China, operating hypermarket, supermarket and convenience store formats throughout the country, including the popular Century Mart chain of supermarkets; Lianhua Supermarket Development runs its supermarket operations.

In February 2009, Bailian bought a 21.17% share in Lianhua from Shanghai Industrial Pharmaceutical for CNY1.06 billion, increasing its stake in Lianhua to a controlling 55.2%. The chairman of Bailian Group, Ma Xinsheng, is also the chairman of Lianhua Supermarket

The sales and purchase agreement was signed on 26 June 2008, and is subject to government approval. Lianhua has already taken over management of Hualian whilst awaiting the agreement completion.

Although both were owned by Bailian, Lianhua and Hualian had previously, until now, been operating under different managements.

In a statement filed to Hong Kong Stock Exchange, Lianhua said the acquisition would expand its market share in the Yangtze River Delta region, particularly in Shanghai province – in line with Lianhua’s announced strategy at the beginning of the year to focus on eastern China. It also believes it will be able substantially grow its franchise business in the Zhejiang and Jiangsu provinces.

In addition, Lianhua noted that it would “strengthen the advantages of its operations” through the acquisition as “the larger scale of procurement will help the Company to have more bargaining power when negotiating with its suppliers.”

Management changes have already been implemented. Hua Guoping, the former general manager for Bailian's supermarket business department, has been appointed general manager for the new Lianhua Supermarket, and Liang Wei, the former general manager of Lianhua Supermarket, has been appointed executive deputy general manager.