On Monday, Suning.com, the retail arm of Suning Group, announced that Jiangsu provincial SASAC (State-owned Assets Supervision and Administration Commission) and Nanjing municipal SASAC took the lead to establish the second phase of Jiangsu Xinxin Retail Innovation Fund, which would acquire 16.96% equity of Suning.com at a price of 5.59 yuan per share, marking the latest move by China to rescue debt-ridden conglomerate.
The e-commerce giant Alibaba, home appliance makers Haier Group and Midea Group, electronics manufacturer TCL, and smartphone maker Xiaomi are also among the fundraisers.
The funding will mount up to 8.83 billion yuan. “The injection of state-owned assets will lay a solid foundation for the stable and healthy development of Suning.com,” Suning stated in its announcement.
After the completion of the transfer agreement, Suning. com will no longer be controlled by shareholders or any defacto controller.
It is worth mentioning that this financing marks Alibaba’s first deal following a months-long antitrust investigation. According to the announcement, Alibaba’s shareholding ratio in Suning.com remains unchanged at 19.99%.
In 2015, Alibaba signed a strategic partnership with Suning.com (previously known as Suning Business Group). Alibaba bought 19.9% equity of the retailer at a price of RMB 28.3 billion, while Suning.com made an investment of RMB 14 billion to acquire 1.1% equity of the e-commerce giant.
Suning.com was established in Nanjing, Jiangsu Province in 1990. Born from a 200-square-meter air-conditioning shop, it has grown into one of the largest retailers of home appliances and consumer electronics in China. After its ambitious advancement in a series of fields such as real estate, finance and sports, the company started to feel the capital crunch. Suning.com said Monday that it expects a loss of 2.5 billion yuan to 3.2 billion yuan in H1 2021, compared with a loss of 170 million yuan in the same period last year. Sales revenue in Q2 is expected to decline by over 30% year on year.
“The biggest challenge Suning.com encountered in the business transformation is the asymmetric rules in the capital market. In the past, the electrical appliance industry mainly relied on the distribution price differences to earn profits. However, today, although the e-commerce platform improves the convenience for consumers and has no cost of offline operation, the high-cost advertising to convert traffic and e-commerce platform operation have crashed the profit margin,” said Sun Weimin, Vice Chairman of Suning.com Group, in an interview with CBN, at the end of June this year.
Shenzhen International announced on the Hong Kong Stock Exchange that it failed to reach a final agreement with Suning.com shareholders on the terms of business cooperation, and decided to terminate the potential acquisition after comprehensive consideration. But both parties will continue to explore opportunities for cooperation in the logistics sector.
Suning’s stock has suspended trading since June 16. After resuming trading this morning, its stock price is now 6.15 yuan per share, an increase of 10.02%.