Dairy Farm strikes $925 m deal with China's Yonghui

Singapore’s retail sector boasts of a very active M&A scene.

Pan-Asian retailer Dairy Farm International announced on Monday evening that it is expanding further into China by buying a stake in Yonghui Superstores, a chain supermarket in China.

In a report by RHB, Dairy Farm International Holdings Limited has agreed to acquire a 19.9% interest in Yonghui Superstores Co by way of subscription of new shares for a consideration of RMB5.69b. DFCL has also entered into a business co-operation agreement with Yonghui.

RHB adds that the subscription price of RMB7 per share represents a discount of 3.05% to the average 20-day volume weighted share price up to 6th August 2014. The investment requires the approval of Yonghui’s shareholders and the obtaining of certain regulatory approvals in the PRC.

According to DFCL, the regulatory approval process is expected to take at least six months to complete. DFCL has also entered into a business co-operation agreement with Yonghui, which comes into effect immediately. Under this agreement, the two groups aim to collaborate in a range of areas, such as procurement, private label product development, fresh food processing and store development. We do not have a rating for this company at this moment.