Wal-Mart in Chinese online store deal
Source: Xinhua |
August 15, 2012, Wednesday
|
Print Edition
Print Edition
The Ministry of Commerce has approved plans by Wal-Mart Stores which will allow the US retail giant to take control of China's largest online supermarket Yihaodian, but with certain restrictions.
If successful, the acquisition will help Wal-Mart grab a bigger slice of China's booming online shopping market.
Wal-Mart got the green light to increase its stake to 51.3 percent from 17.7 percent in a separate company that will own Yihaodian's online retailing business, the ministry said yesterday.
However, the acquisition "may have an effect of excluding or restricting competition in China's value-added telecommunications service market" and can only be completed under several restrictive conditions, said the ministry's anti-monopoly bureau.
Apart from online retailing, Yihaodian also runs value-added services. The government allows foreign investors to hold up to a 50-percent stake in such operators in China.
The acquired business will be limited to online retailing and the acquired company cannot use its Internet platform to provide Internet services for other parties involved in the deal, the ministry has instructed.
In addition, Wal-Mart must not engage in value-added services operated by Yihaodian through the variable interest entity (VIE) ownership structure.
VIEs are a common practice under which foreign co can control - but not legally own - companies operating in China to bypass restrictions on foreign investment in certain areas.
According to a statement released yesterday afternoon by Yihaodian, the deal still needs further regulatory approval and has to meet other conditions.
"Yihaodian fully respects and welcomes the commerce ministry's decision," it said. "We have maintained high-speed growth since launching in 2008 and will create greater value for consumers as our partnership with Wal-Mart deepens."
Wal-Mart submitted its acquisition plan last December and the examination was extended twice, the ministry said, citing concerns that the deal may impede market competition.
As a major retailer in both the Chinese and the global market, Wal-Mart will be able to deliver its advantages in the physical market to online retailing business after the acquisition, the ministry assessed.
Because of its comprehensive strength in both offline and online retailing, the acquired company would be able to gain a dominant position if it is allowed to enter China's value-added service market through Yihaodian, and substantially increase its bargaining power with Internet users, the ministry concluded.
Founded in Shanghai in July 2008, Yihaodian sells a range of goods including food, cosmetics and consumer electronics.
The website had more than 18 million registered users as of May 2011, and its sales exceeded 800 million yuan (US$126 million) in 2010, according to company information.
Online shopping transactions in China, which has 210 million online shoppers, reached 268.4 billion yuan in value in the second quarter of this year, up 51.6 percent year on year, according to Internet industry research agency iResearch.
In that period, the market value of sales from businesses to consumers surged more than 140 percent from a year earlier to 89.4 billion yuan, iResearch said.
If successful, the acquisition will help Wal-Mart grab a bigger slice of China's booming online shopping market.
Wal-Mart got the green light to increase its stake to 51.3 percent from 17.7 percent in a separate company that will own Yihaodian's online retailing business, the ministry said yesterday.
However, the acquisition "may have an effect of excluding or restricting competition in China's value-added telecommunications service market" and can only be completed under several restrictive conditions, said the ministry's anti-monopoly bureau.
Apart from online retailing, Yihaodian also runs value-added services. The government allows foreign investors to hold up to a 50-percent stake in such operators in China.
The acquired business will be limited to online retailing and the acquired company cannot use its Internet platform to provide Internet services for other parties involved in the deal, the ministry has instructed.
In addition, Wal-Mart must not engage in value-added services operated by Yihaodian through the variable interest entity (VIE) ownership structure.
VIEs are a common practice under which foreign co can control - but not legally own - companies operating in China to bypass restrictions on foreign investment in certain areas.
According to a statement released yesterday afternoon by Yihaodian, the deal still needs further regulatory approval and has to meet other conditions.
"Yihaodian fully respects and welcomes the commerce ministry's decision," it said. "We have maintained high-speed growth since launching in 2008 and will create greater value for consumers as our partnership with Wal-Mart deepens."
Wal-Mart submitted its acquisition plan last December and the examination was extended twice, the ministry said, citing concerns that the deal may impede market competition.
As a major retailer in both the Chinese and the global market, Wal-Mart will be able to deliver its advantages in the physical market to online retailing business after the acquisition, the ministry assessed.
Because of its comprehensive strength in both offline and online retailing, the acquired company would be able to gain a dominant position if it is allowed to enter China's value-added service market through Yihaodian, and substantially increase its bargaining power with Internet users, the ministry concluded.
Founded in Shanghai in July 2008, Yihaodian sells a range of goods including food, cosmetics and consumer electronics.
The website had more than 18 million registered users as of May 2011, and its sales exceeded 800 million yuan (US$126 million) in 2010, according to company information.
Online shopping transactions in China, which has 210 million online shoppers, reached 268.4 billion yuan in value in the second quarter of this year, up 51.6 percent year on year, according to Internet industry research agency iResearch.
In that period, the market value of sales from businesses to consumers surged more than 140 percent from a year earlier to 89.4 billion yuan, iResearch said.
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