Beijing Hualian Group, the sixth largest commercial chain retailer of China, has reportedly acquired Seiyu Singapore, a retail department store operator, making it the first Chinese retail company to enter the Singaporean market.

It bought the Singapore branch, with three stores currently in operation, of Japan-based Seiyu Ltd from CapitaLand Ltd, the top real estate developer in the Southeast Asian country. The acquisition cost 4 million Singapore dollar, or around 19.12 million yuan (US$2.36 million).

Insiders indicated the acquisition could be regarded, to some extent, as a collaboration. Prospects, however, were difficult to predict.

"The deal concerns close relations between Beijing Hualian, CapitaLand and US retailer giant Wal-Mart," said Huang.

Actually, Japan Seiyu Ltd is Wal-Mart's subsidiary, as Wal-Mart has increased its stake in the Japanese retailer to 54 per cent with an additional 67.5 billion Japanese yen or US$565 million last December.

Ji Xiao'an, chairman of Beijing Hualian Group, told China Daily the transaction was progressing smoothly and his company is optimistic about the future of Seiyu Singapore.

The move is also the first time Beijing Hualian does business outside China, according to Huang Guoxiong, professor of Renmin University majoring in commercial business.

In line with the acquisition agreement, Beijing Hualian will keep Seiyu's present executives and employees for the local business operation, but Seiyu Singapore will have to change its name two years later.

"We will also take other Southeastern Asia markets into consideration, like Malaysia and Thailand, once the market is mature about two or three years later," said Ji.

Ji believes that Singapore is an international market and its retailing culture is very much similar with China's, which is one of the key reasons for the deal.

"In addition, language is not the barrier hindering operations in Singapore," Ji pointed out, noting that the supervision instead of operation role of the group might guarantee the stability of Singapore Seiyu in terms of procurement, sales and marketing.

Japan Seiyu has posted a loss for five consecutive years and expects an even bigger loss this year, so it is seeking to dispose some of its overseas assets to revamp the group in general.

CapitaLand, which acquired the Singaporean unit of Seiyu Ltd in October 2005, has been acting as a property advisor for Wal-Mart's outlets in many Asian countries and holds a batch of commercial real estate projects at the continent.

On the other hand, the Singapore property behemoth is a business partner with Beijing Hualian. Previously, Beijing Hualian Group sold its two shopping malls in Beijing to CapitaLand for 1.746 billion yuan (US$216 million), and the two sides signed an agreement to set up a 50/50 joint venture to manage the retailing of the two shopping malls.

Moreover, CapitaLand holds the preferential option to acquire the six department stores that Beijing Hualian will open in Beijing and Wuhan before the end of 2005.

Ji said that both sides got what they want and the co-operation facilitated their expansion in their target countries.

"The Seiyu transfer is in light of the further coalition of the two partners, as Beijing Hualian boasts rich experiences on retailing," said Huang.

Analysts, however, are not as optimistic as Beijing Hualian, considering the previous failures of many Chinese retailers, such as Tiankelong, Shanghai Hualian, and Shanghai Department Store in Russia, Australia, New Zealand and some Asian countries.

"Singapore is a very mature retailing market," said Xu Xiaofang, Guotai Jun'an's senior retailing analyst. "I am not sure if Beijing Hualian has enough operation ability to compete with the local counterparts."

But she said she appreciated Beijing Hualian's strategy to keep the local operation team and reminded the Chinese retailer to be cautious when seeking further expansion to other marketplaces.

Source: China Daily