Chinese billionaire Zhang Jindong (張近東) secured a US$1.36 billion state-backed bailout for the troubled retail arm of his Suning (蘇寧) empire, marking another step in Beijing’s efforts to clean up its heavily indebted conglomerates.
A group of investors, led by the Nanjing State Asset Management Committee and the Jiangsu provincial government, is to take a 16.96 percent stake in Suning.com Co (蘇寧易購), a statement said on Monday.
The deal was struck at 5.59 yuan a share, the near eight-year low the stock was trading at before it was halted on June 16. The shares surged 10 percent in Shenzhen trading yesterday.
Alibaba Group Holding Ltd (阿里巴巴) and leading Chinese appliance makers Midea Group Co (美的集團) and Haier Group Co (海爾集團) are also partners in the fund, as are smartphone maker Xiaomi Corp (小米), and TCL Technology Group Corp.
After the transaction, none of the major holders are to have a controlling stake.
The bailout means Zhang would no longer control Suning.com, marking the end of a reign during which he led Suning into an array of businesses, including ownership of the Inter Milan soccer team.
“The diversified investor portfolio helps push Suning.com to further improve the corporate governance, operations and business transformation as a retail service provider,” the statement said. “The fund will actively support Suning to grow healthily and stably.”
Suning.com had a market value of about 52 billion yuan (US$8 billion) before the trading halt, but it has been in trouble for some time. The retail business was weakened by a slowdown in spending during the COVID-19 pandemic and concerns about its cash flow intensified in September last year, when Zhang waived his right to a 20 billion yuan payment from China Evergrande Group (恒大集團), the world’s most indebted property developer.
The stock tumbled last month after a Beijing court froze 3 billion yuan worth of shares held by Zhang — representing 5.8 percent of Suning.com — and creditors agreed to extend a bond for Suning Appliance Group Co (蘇寧電器).
In a separate statement on Monday, the listed retail arm of Suning, one of China’s biggest retailers of appliances, electronics and other consumer goods, said it posted a preliminary first-half loss of 2.5 billion yuan to 3.2 billion yuan.
China is taking advantage of a strengthening economy and stable financial markets to clean up its corporate sector, discouraging the kind of reckless debt-fueled expansion that inflated some companies to a dangerous size.
Suning was a prime example of that rapid diversification as it dove into an array of sectors from real estate and finance to sports, including the purchase of a controlling stake in Inter Milan for 270 million euros (US$320 million at the current exchange rate) in 2016.
After the deal, Zhang, who used to be the biggest holder in Suning.com, is to have his stake cut to 17.62 percent, while a related party, Suning Holdings Group (蘇寧控股), is to own 2.73 percent.
Prior to the bailout, Alibaba had a 19.99 percent stake from a 2015 strategic alliance. Given its participation in the state-led sale, the e-commerce giant’s total holdings would now be more than that, although details were not disclosed.
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