CHINA. Powerful department store company Wangfujing Group announced on 25 May that it plans to acquire 100% equity of Hainan Outlets Tourism Development Co Ltd. (Hainan Outlets Tourism).
The deal valuation is CNY160 million (US$23.9 million). However, the announcement, issued via the Shanghai Stock Exchange, says that the acquisition will also include the assumption of CNY777 million (US$116 million) principal and interest of shareholder borrowings, making the total consideration CNY937 million (US$139.9 million).
“Outlet business in China is a large and rapidly growing market. Wangfujing will bring its own operational advantages and a focus on lifestyle experience to the project and develop it into the largest outlet shopping centre in Hainan, offering a wide diversity of services and experiences.”
“This transaction does not constitute a related transaction, nor does it constitute a major asset restructuring event,” Wangfujing said in the announcement.
The stake in Hainan Outlets Tourism Development Co was publicly listed for sale by Juyuan Xincheng (Tianjin) Investment Management Co on 21 April on the Beijing Stock Exchange by tender. Wangfujing was later identified as the successful buyer.
Hainan Outlets Tourism, wholly owned by Juyuan Xincheng, a subsidiary of Beijing Capital Land, has a registered capital of CNY300 million (US$44.8 million). It is the developer and operator of the Wanning Capital Outlets in Wanning, Hainan, which opened in 2014. Wanning, located on Hainan’s Southeast coast about a 90-minute drive from Sanya, is a prime tourist destination famed for its historic culture and beautiful scenery.
The integrated shopping and leisure complex is the biggest of its kind in Hainan and has a total commercial building area of 180,000sq m. In addition to over 200 outlet stores featuring premium international brands, it also has a variety of dining and entertainment venues.
The announcement shows that in 2021, Hainan Outlets Tourism had an operating income of CNY67 million (US$10 million) and a net loss of CNY30 million (US$4.5 million)
Beijing-based Wangfujing Group is China’s oldest department store groups and one of the country’s most renowned retailers. As reported, it was granted a duty free licence in June 2020, but is still waiting to make its debut in the sector.
In July 2020 it created a wholly owned subsidiary duty free company, Beijing Wangfujing Duty Free Management Co Ltd (Wangfujing Duty Free), with registered capital of RMB500 million (US$72 million).
According to the group’s 2021 financial report, it has 14 stores throughout China, most of them in northern provinces. The report also outlines the group’s ambitions in developing its duty free business, with a focus on Hainan and Beijing. “As of the date of this report, the company has not yet implemented any specific duty free operations,” it says.
“Right now, outlet business in China is a large and rapidly growing market,” Wangfujing Group said in the announcement. “The establishment of the Hainan Free Trade Port will surely turn the island into a holiday, wellness and shopping paradise, as well as a convention and exhibition hub, which will be the first steps towards making Hainan a world-renowned tourism and consumption centre.
“In order to seize this historical opportunity, the company plans to speed up the overall development of its various businesses in Hainan,” the company added.
“With future-facing plans and strategies, we will create a new model of business integration based on the characteristics of different target demographics, business districts and properties, and ultimately build stronger competitive advantages and a wider influence.”
Speaking of the implications of the acquisition, the group says: “This project [Wanning Capital Outlets] enjoys a well-established transportation network and great connectivity to the entire island.
“In addition, with a rapidly developing local economy, the city of Wanning stands as an emerging high-end tourism destination in Hainan, which in turn has brought considerable traffic to the complex.
“While the project already boasts a variety of first- and second-tier brands from across the globe, Wangfujing will bring its own operational advantages and a focus on lifestyle experience to the project and develop it into the largest outlet shopping centre in Hainan, offering a wide diversity of services and experiences.”
Footnote: Every fortnight The Moodie Davitt Report publishes Hainan Curated, in association with Foreo, a selection of all recent stories from the offshore duty free sector in Hainan province. Click here to view all back issues. Please email Kristyn@MoodieDavittReport.com to subscribe.
