Investment in Heilan Home Leads to Speculation About Wave of M&A Fever
Liao Shumin
/SOURCE : Yicai
Investment in Heilan Home Leads to Speculation About Wave of M&A Fever

(Yicai Global) Jan. 31 -- Leading Chinese fashion apparel retailer Heilan Home Co. [SHA:600398] has announced its decision to introduce a new investor, setting off speculation about a new wave of merger and acquisition fever among major internet companies.

Tencent Holdings Ltd., which has been active in the offline retail market in recent months, is the new backer for the menswear fashion brand, online media outlet Kr36 reported yesterday.

Although Tencent did not confirm the news and Heilan Home declined to provide information besides what was disclosed in the statement, some market observers think the Shenzhen-based group and its peers may be eying firms for M&As.

Heilan Home said yesterday that it plans to transfer a 5 percent stake to the new investor, and the pair will set up an industry investment fund. The firm will report on the deal's progress and apply for stock trading resumption by Feb. 5. The firm's share price rose 6 percent to a nine-month high on Jan. 26. Trading was suspended Jan. 29.

Heilan Home has also teamed up with Alibaba Group Holding Ltd. and JD.Com Inc. in recent years. Alibaba's Jack Ma went to Heilan Home's Jiangsu headquarters in August. "I hope that Alibaba and Heilan Home will engage in more win-win collaborations in e-commerce businesses at a deeper level in the 'Internet Plus' era," the billionaire said during his visit.

JD.Com founder and Chairman Liu Qiangdong endorsed the fashion brand earlier this month, posting a message on Chinese news app Toutiao along with a photo of himself wearing Heilan's products and touting the firm as a top Chinese men's brand.

The strengthening connections between JD.Com and Heilan Home point towards Tencent, a major investor in the e-commerce group, as the new backer. Tencent typically only acquires minority stakes in target companies, which fits well with Heilan's plan to sell a 5 percent interest.

The race between Alibaba and Tencent in the offline retail market will escalate this year. Since they have locked in all the major supermarket brands, their battle is poised to spread to clothing retail, catering, convenience stores and shopping malls.

Heilan Home operates about 5,000 stores, and its sales revenue was CNY16.9 billion in 2016, making it the number one market player by both metrics. It is valued at CNY51.4 billion. Given its price-earnings ratio of 15.96, the deal makes sense for the tech conglomerate. 

 

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Keywords: TENCENT , JD.com , Heilan Home