Carrefour sells control of China business at a discount

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Carrefour will retain a 20% stake and two seats out of seven on the China unit’s Supervisory Board, it says in a statement on Sunday. FMTNews

PARIS: Carrefour SA has agreed to sell an 80% stake in its China unit for 4.8 billion yuan in cash to local retailer Suning.com Co. as it rethinks its exposure in the world’s No. 2 economy after years of decline.

The valuation of Carrefour’s China unit at 0.2 times its 2018 price-to-sales ratio – compared to an industry average of 0.8 times is at a “significant discount to peers likely due to poor financial results,” said Citigroup Inc. analysts led by Lydia Ling in a note Monday. “The big problem for Carrefour and other western grocery chains is that they have major challenges in their home countries and can’t afford to grow in China,” said Pascal Martin, a Hong Kong-based partner at OC&C Strategy Consultants. “In China, if you want to grow in the groceries space, you have to continue to invest capital in less developed cities.”It’s the end of an era for one of the first foreign brands to gain a loyal following among Chinese consumers.

For Nanjing-based Suning, primarily an electronics retailer, the deal will help it cut procurement and logistics costs and boost profitability, the company said in a statement Sunday. Its Shenzhen-listed shares rose as much as 6.5% in early trading on Monday as investors rewarded the retailer for closing the deal at a low price.

 

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