France-based Carrefour has signed an agreement to sell an 80% stake in its China-based operations to Suning.com. The deal will see Suning pay Carrefour €620.0m in cash, valuing Carrefour China at an enterprise value of €1.4bn.
Carrefour may exit China completely
The transaction is expected to close by the end of 2019, subject to regulatory approval. Carrefour will retain a 20% stake in the business and two out of seven seats on Carrefour China’s Supervisory Board. However, the agreement allows Carrefour to sell the remaining stake in two years’ time.
Carrefour China has struggled in recent years
Carrefour has been presence in China since 1995, but it has been struggling to grow in recent years amid fierce local competition and the rise of the ecommerce channel more widely. Carrefour has implemented several turnaround plans in recent years, but despite these, it has generated negative like-for-like sales since 2011. At the end of its 2018 financial year, the retailer operated 210 hypermarkets and 24 convenience stores and generated total net sales of about €3.6bn and EBITDA of €66m.
Suning is a Chinese electronics retailer and ecommerce player. It operates more than 8,881 stores in more than 700 cities and one of the country’s largest B2C ecommerce platform. Suning said in filing to the Shenzhen stock exchange that “the stake acquisition will allow Suning.com to strengthen its brand, as well as boosting its marketing capabilities, food quality control and supply chain management in the fast-moving sector”.
Where does it leave Carrefour’s agreement with Tencent?
One area not answered by Carrefour’s announcements is where the sale of Carrefour China leaves its existing relationship with Tencent. Announced in Q1 2018, the agreement has been highlighted by Carrefour Group’s chief executive, Alexandre Bompard, as supporting its growth, while the president and chief executive of Carrefour China, Thierry Garnier, has said how ’China is a specific market that has helped us to learn and to understand the future’. With Carrefour potentially exiting China over the course of the next two years, where this leaves its agreements and what it can learn from the country in question.
IGD Asia newsletter
Keep up-to-date with the latest retail developments from Asia.
Sign up for our newsletter »