(Yicai) Sept. 24 -- Shares of Miniso sank after the Chinese discount retailer said it will invest CNY6.3 (USD893 million) in Chinese fresh-goods supermarket operator Yonghui Supermarket to become its largest shareholder.

Miniso [HKG: 9896] plunged 28.1 percent to HKD23.65 (USD3.04) a share as of 10.35 a.m. in Hong Kong today. Yonghui Supermarket's stock [SHA: 601933] surged by its daily trading limit of 10 percent to CNY2.48 (35 US cents) in Shanghai.

Miniso will buy a 21.1 percent stake in Yonghui Supermarket from top retailer DFI Retail Group and an 8.3 percent stake from e-commerce giant JD.Com, it announced yesterday. The deal will help it expand its offline retail footprint, it added.

After completing the transaction, Miniso and Yonghui Supermarket will co-develop higher-quality branded products at lower costs, which is expected to improve competitive differentiation, the Guangzhou-based company noted.

"From a business perspective, although both are retailers, Miniso focuses on affordable groceries and other essential products, while Yonghui Supermarket mainly runs as a supermarket chain," an industry insider told Yicai. "Their subdivisions are also different, so a merger is unlikely. They are expected to keep their independent brands."

Yonghui Supermarket has established a huge store network and supply chain in the Chinese market, Miniso said, adding that it can further enhance economies of scale and optimize cost structure via cooperation and resource sharing.

"Miniso is operating well, so the company hopes to expand its territory and cover a more complete range of businesses via mergers and acquisitions," the insider noted. "Yonghui Supermarket is under considerable operating pressure and likely looked for investors to relieve it."

Yonghui Supermarket's net profit plunged 26 percent to CNY275 million (USD38.9 million) in the six months ended June 30 from a year ago due to weak consumption, according to its latest financial report. Its operating revenue fell 10 percent to CNY37.8 billion (USD5.4 billion).

Fuzhou-based Yonghui Supermarket focuses on large-scale integrated supermarkets and community supermarkets. It operates around 850 stores in more than 25 Chinese provinces and municipalities.

Editor: Martin Kadiev