Yonghui, Parknshop and Tencent to jointly establish JV
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Tencent has teamed up with ParknShop and Yonghui Superstores to create a new combined grocery chain ParknShop Yonghui. The joint venture, valued at US$170 million, aims to help Shanghai-listed Yonghui expand its business outside of the southern province of Guangdong, as well as consolidating Yonghui and ParknShop’s businesses in the province.
Yonghui gains half of the joint venture with $89.6 million while ParknShop will hold a 40 per cent stake with cash and equity contributions amounting to $72 million, and Tencent will pay $18 million yuan for a 10 per cent stake.
Tencent spent $750 million to buy a 5 per cent stake in Yonghui last December, with ambitions to shake up the bricks-and-mortar shopping market and compete with rival Alibaba Group.
Yonghui operates more than 830 supermarkets in 24 provinces, 21 of them in Guangdong.
ParknShop, a member of the AS Watson Group, has more than 50 shops in the southern province.
This is the first time companies within the group have formed a joint venture with mainland Chinese firms.
Questions & Answers
Q.What is the primary goal of the joint venture for Yonghui?
What is the primary goal of the joint venture for Yonghui?
Yonghui aims to expand its business beyond its current stronghold in the southern province of Guangdong. The joint venture will also help to consolidate its existing operations within Guangdong itself.
Q.What is the total valuation of the new joint venture?
What is the total valuation of the new joint venture?
The combined grocery chain, ParknShop Yonghui, has been valued at US$170 million. This figure represents the total worth of the new entity established by the three participating companies.
Q.How does this joint venture fit into Tencent's broader strategy?
How does this joint venture fit into Tencent's broader strategy?
Tencent previously invested in Yonghui last December, demonstrating its ambition to disrupt the physical retail market. This joint venture is a further step in its strategy to compete with rival Alibaba Group in the bricks-and-mortar sector.
Q.What proportion of the joint venture does each company hold?
What proportion of the joint venture does each company hold?
Yonghui owns 50% of the joint venture, ParknShop holds a 40% stake, and Tencent has acquired a 10% share. These proportions are based on their respective cash and equity contributions.
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