Hengdeli Holdings agrees to buy watch retailer Shenzhen Feierpusi Electronics Co
Hong Kong-based Hengdeli Holdings Ltd will be buying control of Shenzhen Feierpusi Electronics Co, a controlling stakeholder of a watch, gold, jewelry and eyewear retailer in Nanchang, reported Bloomberg. Hengdeli Holdings Ltd is the Chinese retail partner of Swatch Group. Through its subsidiaries, Hengdeli Holdings retails and wholesales international brand watches in China. According to another Bloomberg report on February 7, Swatch Group has a 9.1% stake in Hengdeli.
Shenzhen Feierpusi Electronics Co has an 88.6% holding in Nanchang Hengdeli Co based in the capital of Jiangxi, a province in eastern China. A Hong Kong exchange filing showed that Hengdeli will be acquiring the retailer for a price tag of $77.3 million or CNY 469.5 million, the report said.
Hengdeli said that the purchase of Shenzhen Feierpusi Electronics can "strengthen and consolidate the retail market of watches of the group in the central areas" of China. The filing revealed that the profit of the acquisition target in the first 11 months of 2013 was CNY 3.17 million. In 2011, the filing showed that the target had profits of CNY 8.62 million while they posted profits of CNY 6 million last year.
According to the report, the luxury retailers in China have suffered from a government crackdown on lavish dining and giving of presents, especially when it comes to officials and public agencies. In August, Hengdeli said that its net income for the first six months of the year dropped from CNY 562.7 million from the year before to CNY 272.5 million since it was more flexible in giving discounts on its high-end brands.
Hengdeli said the seller of the Nanchang retailer is Shenzhen Tongqingwang Trading Co. According to the report, the firm had already given a payment of CNY 338.2 million. The balance will be paid upon completion once the deal is already registered with the government.