Transfer pricing

Jiangsu government rides to Suning’s rescue


Zhang: opted for new Jiangsu deal

Over the years football fans have learned to take media reports about player transfers with a pinch of salt. Don’t count on the biggest deals going through until you see the newly-signed player waving the team scarf above his head at a press conference.

After all, media manipulation is one of the dark arts of football agents. If a top player wants a lucrative new contract from his club, a good way to go about it is to hint in the press at wanting a move elsewhere. Similarly, if a club wants to sell a star player it is in its interest to put it about on the sports pages that there are plenty of buyers in the frame, in a bid to draw higher offers.

Suning is no stranger to the football world. The retail conglomerate owns Italian champions Inter Milan and also ran Jiangsu Suning, winner of last year’s China Super League (CSL) title last season, until it went out of business earlier this year, after its parent group ran into financial trouble.

In a bid to buy some time to resolve these financial woes the Nanjing-based group also announced in March that it had agreed to sell a combined 23% in its crown jewel Suning.com for Rmb15 billion ($2.3 billion) to Shenzhen International and Kunpeng Capital, both of which are backed by the Shenzhen local government (see WiC530).

But just when investors were expecting the retailer to switch some of its business focus to the Greater Bay Area (GBA), there was confirmation this week that the Jiangsu government had made a bid of its own to keep one of the province’s best-known enterprises closer to home.

In a deal worth about $1.4 billion, Suning.com announced on Monday that founder Zhang Jindong and related parties will sell a 16.96% stake in the Shenzhen-listed firm to a ‘new retail’ fund backed by the provincial government of Jiangsu, where Suning is headquartered.

Other investors in the fund include e-commerce giant Alibaba (which already owned a 19% stake in Suning.com), as well as home appliance makers Haier, TCL and Xiaomi, all of which are major customers of Suning’s retail network (a leader in sales of consumer electronics and home appliances).

Shenzhen International, one of the previous bidders, announced that it would not be proceeding with the earlier plan – agreed just a few months ago – but it did not explain in detail why the deal had lapsed.

Investment firms backed by the Shenzhen government have become a force in recent years (see WiC534), with a number of successful acquisitions including the Rmb100 billion purchase of Huawei’s budget phone unit Honor last year.

According to Prism, a news outlet operated by Tencent, Shenzhen International and Kunpeng Capital sent a large team to Suning.com to look at the books before making their offer. “After considering the results of the due diligence, the market realities and the interests of both shareholders and investors, Shenzhen Sasac [the city’s controller of state assets] eventually decided not to proceed with the investment [in Suning.com]. This was a market-oriented decision,” Prism explained, citing unnamed sources.

Instead the retailer turned to a new set of bidders, with Prism claiming that “there had been interest from Jiangsu Sasac all along”.

Could there have been some manoeuvring akin to the football transfer market, perhaps? WiC wonders if a chagrined Jiangsu government might have been encouraged to make its own sweeter offer for Suning.com or whether it simply came in as a last-resort rescuer after Shenzhen Sasac decided to pull out.

Suning.com’s shares had dropped to a 10-year low before trading was suspended on June 15, pending a final announcement on the restructuring. Nevertheless, the deal sounds like better news for the current shareholders, including Zhang himself. Although he loses overall control of Suning’s retail flagship, he still keeps about 20% of the shares. Its new shareholders, some funded by state capital, also say they are willing to help with Suning’s transition into a “retail service provider”, the company added.

Like any top quality soccer agent, perhaps Zhang got the deal that he preferred…

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