Business Intelligence on Retailing, Franchising, and Consumerism in China

Chinese Electronics Retailer Buys Rival

Chinese electronics and home appliances retailer Gome has signed an acquisition agreement with Beijing Zhansheng, which will sell its entire stake in Dazhong to Gome for CNY3.83 billion.

The foundation of the acquisition was laid early in 2007 when Tianjin Consultancy, a wholly-owned subsidiary of Gome, provided a loan in the amount of CNY3.6 billion to Beijing Zhansheng for Beijing Zhansheng to acquire the entire equity interest in Dazhong.

With this loan and related agreement, Gome gained an irrevocable option to acquire the entire equity interest in Dazhong at any time. Meanwhile, Tianjin Consultancy was appointed as the exclusive agent to manage the operation of Dazhong.

The loan was originally for a term of one year from December 14, 2007, to December 13, 2008. However, it was not repaid upon the expiry of its original term and was renewed subsequently until December 4, 2015. During the period, Tianjin Consultancy obtained the net profits of Dazhong as a management fee.

Dazhong is a Beijing-based consumer electronics and home appliances retail chain. By March 31, 2015, the company's net asset value was CNY4.13 billion. Its net profits after tax were CNY202 million and CNY156 million in 2013 and 2014, respectively.

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