Gome Electrical Appliances, the Hong Kong-listed Chinese electrical appliances retailer – is planning to spend $11.268 billion acquiring rival Artway Development.
Buying Artway, wholly-owned by Gome’s controlling shareholder, will allow Gome to expand its presence from 269 cities to 436 cities across Mainland China.
More importantly, it will significantly boost Gome’s distribution and supply chain operations and bolster its buying power with suppliers.
Wang Junzhou, Gome’s CEO, said the acquisition will further strengthen Gome’s total retail value chain and fuel its expansion in second and third-tier markets, and eCommerce development in particular.
In a statement, Gome said its leadership in the electrical appliances and consumer electronic products retail market in the PRC will be strengthened further upon the acquisition,” Gome said in a statement.
“With the injection of quality retail stores and creation of synergies in supply chain, Gome will take advantage of the growth potential offered by both the online and offline platforms to bring forth a better total retail experience to consumers.”
Gome says it expects the acquisition to reap synergies from the integration and sharing of resources in retail sales operations, procurement, logistics, after-sales services, warehousing, information technology infrastructure and human resources.
“Other benefits include facilitating a more flexible fulfilment management, as well as cost savings in warehousing and distribution.”
Gome says Artway’s stores are largely located in fast-growing second and third-tier cities, which are highly complementary to the group’s existing retail store network.
“Concurrently, the empowerment of the retail store network will accelerate the Group’s eCommerce development, promoting full integration online and offline.”
Artway has 578 stores in 181 Chinese cities. Most are located in Central and Western China, Bohai Bay and the Beijing-Tianjin-Hebei region forming part of China’s Economic Zones with significant governmental support. The latter includes the Silk Road Economic Belt, Greater Northeast Economic Area, Yangtze River Economic Belt and Beibu Gulf Economic Zone.
The merger of the logistics networks will give the company full nationwide reach, a significant boost to its eCommerce potential.
“The acquisition will enable Gome to upgrade its existing logistics network which covers 21 regional and 407 city distribution centers, by bringing together the listed and non-listed logistics arms. With the support of its 1714 retail stores, the group is poised to successfully complete its national logistics coverage deployment, forming a multi-dimensional logistics network with regional and city warehousing as well as national last-mile distribution coverage spanning more than 600 cities, 2500 counties and 45,000 towns that can enjoy localised distribution and installation,” Gome said.