Image Source: yonghui superstores

Lanjing News on September 23rd (Reporter Sun Yu): Miniso (09896.HK) plans to acquire 29.4% equity of yonghui superstores for 6.27 billion yuan (same below).

Tonight, yonghui superstores (601933.SH) announced that its shareholders, Milk Company, JD World Trade, and Suqian Hanbang, intend to respectively transfer their holdings of 1.913 billion shares, 0.367 billion shares, and 387 million shares to Guangdong Juncai International Trading Co., Ltd. (a wholly-owned subsidiary of Miniso), accounting for 21.08%, 4.05%, and 4.27% of the total share capital of the company.

According to the announcement, after the completion of this transaction, the largest shareholder of the company will change to Juncai International, holding a total of 29.40% of the company's shares. Juncai International and its controlling entity Miniso (09896.HK) will work with yonghui superstores to transform into a quality retail model.

Image Source: yonghui superstores Announcement

Yonghui stated that this equity change does not constitute a related party transaction and does not involve a tender offer. In addition, the source of funds for this equity change is from the self-owned and self-raised funds of Juncai International and its shareholders. According to the disclosed "Share Purchase Agreement" in the announcement, the price per share corresponds to 2.35 yuan.

After the share transfer, Juncai International becomes the largest shareholder.

Yonghui Superstores was established in 2001 and went public on the A-share market in 2010. It is one of the first domestic companies to introduce fresh agricultural products into modern supermarkets. The company's 2024 interim performance report shows that in the first half of this year, Yonghui Superstores achieved a total operating income of 37.779 billion yuan, a year-on-year decrease of 10.11%. The net income attributable to the listed company's shareholders was 0.275 billion yuan, a year-on-year decrease of 26.34%.

The semi-annual report shows that the registered memberships for the "Yonghui Life" app have exceeded 0.2 billion households. In terms of the number of stores, in the first half of this year, Yonghui added 5 new stores, closed 62 tail stores, with a total of approximately 850 stores, covering over 25 provinces and municipalities nationwide. In terms of product structure, in the first half of this year, Yonghui optimized its product structure with 20,276 new products introduced and 22,480 products phased out, with a new product introduction rate of 22.5% and a phase-out rate of 24.9%.

Regarding this acquisition, Miniso announced today that the consideration will be paid in cash, and will be allocated from the group's internal financial resources and external financing. After the completion of the transaction, the financial performance of the target group will not be consolidated into the company's accounts but will be recorded in the group's financial accounts as an investment in an associated company.

Image Source: Company Announcement

Miniso stated that it continues to be bullish on the development of the offline retail industry in China, and this acquisition is in line with the company's overall global strategy and is beneficial to the overall shareholders. The group has unique capabilities and experience in developing proprietary brands, design, and IP products. After the acquisition, the group can provide support to the target group through business cooperation, and the target group can leverage the group's advantages to develop higher-quality proprietary brand products at a lower cost, which is expected to enhance the target group's competitive edge. The group and the target group can further improve economies of scale, optimize cost structure, create more value for consumers, and increase the group's return on investment through business cooperation and resource sharing.

In addition, Miniso believes that the acquisition will expand the group's investment and operation channels in the daily retail business, thereby enabling the group to diversify the risks of cyclical business. This is of strategic importance to the group.

Tonight, Miniso's CFO, Zhang Jingjing, stated during a conference call that after the acquisition of a 29.4% stake in Yonghui Superstores, Miniso will become Yonghui Superstores' largest shareholder. "However, we do not expect to control the majority of the board seats, so we will not be the controlling shareholder or de facto controller of Yonghui Superstores, nor will we merge financial statements. This judgment is made based on the current situation. The transaction is expected to be completed in the first half of 2025, and at each important milestone during this period, we will disclose to everyone."