Wumart Stores Inc., the Chinese supermarket operator, said plans to buy stores from CP Lotus Corp. won’t proceed, two months after both companies announced the deal. Their shares tumbled.
“Despite extensive negotiations in good faith, CP Lotus and Wumart were not able to make sufficient progress in reaching agreement on certain key terms for the proposed transactions,” CP Lotus said today. “The proposed subscriptions and the proposed acquisition will not proceed.”
Wumart fell as much as 7.7 percent to HK$10.10 in Hong Kong trading, headed for the lowest close since July 2009. CP Lotus dropped as much as 5.2 percent, headed for the lowest level since July this year. The city’s benchmark Hang Seng Index fell 0.4 percent as of 10:10 a.m.
Phone calls to Gaby Yau, a spokeswoman at CP Lotus, weren’t answered. Shirley Lo, from a public relations firm hired by Wumart, declined to immediately comment.
Beijing-based Wumart was to buy 36 stores from CP Lotus, partly owned by a unit of Thai billionaire Dhanin Chearavanont’s Charoen Pokphand Group, for HK$2.3 billion ($297 million) through a share swap, to expand in northern China while CP Lotus was to keep some outlets in China’s Guangdong and Hunan regions, both parties announced in October.
The CP unit that owns the stores that were to be sold had net debt of 434 million yuan as of June 30. As part of the October deal, Wumart would have gained a stake of about 10 percent in CP Lotus worth about HK$548 million, while CP Lotus would have obtained about 14 percent of Wumart valued at HK$2.9 billion.
CP Lotus has 55 stores in China including 19 outlets in Guangdong and Hunan, according to the company.
Wumart’s net income rose 2.7 percent to 602 million yuan last year. As of June 30 this year, it had a retail network of 541 stores, with 145 superstores and 396 mini-marts.
“The company would wish to emphasize that it has taken into account the best interests of its shareholders,” Wumart said in a separate Hong Kong exchange statement today.