Carrefour (家乐福), once counted among China's three major big-box retailers, sold 12 subsidiaries for 1 yuan (about 195 won) each. The total sale price is 12 yuan (about 2,300 won). Carrefour is operated by Suning.com (苏宁易购), one of China's major retailers, but as the acquisition failed to generate synergy and triggered a vicious cycle, it appears the company began by offloading "negative subsidiaries" to improve its corporate structure.
According to Chinese business outlet Caixin on the 11th, over the past decade or so, large hypermarkets in China have been pushed out of the retail market as e-commerce led by Alibaba, JD.com, and Pinduoduo surged. In response, foreign-owned hypermarkets that had entered China are looking for buyers or gradually pulling out of the Chinese market.
The new owner of Carrefour became Suning.com. Suning.com is an online and offline retail company similar to Korea's LOTTE HIMART. It started with specialty sales of home appliances and electronics, then expanded into e-commerce, department stores, and hypermarkets. Until the early 2010s, it was regarded as one of China's three major e-commerce platforms, but its liability rose rapidly due to aggressive expansion.
◇ Acquisition has struggled since 2019… agreement reached after six years
In Jun. 2019, Suning.com acquired 80% equity in Carrefour for 4.8 billion yuan (about 937.4 billion won), with plans to acquire the remainder in partitions and complete a 100% acquisition by the end of 2022. But within a year, Suning.com fell into a severe liquidity crisis. By the end of 2020, short-term liability alone exceeded 120 billion yuan (about 23.442 trillion won), effectively putting it in default.
In the end, Suning.com failed to pay the remaining amount and invested 200 million yuan (about 39.1 billion won) to acquire only an additional 3.3% equity. Suning.com ended up acquiring 83.33% of Carrefour, not 100%. After three years of negotiations, the two sides reached an agreement in Aug. this year. Suning.com will pay Carrefour 220 million yuan (about 43 billion won) as a settlement, and Carrefour will waive the 1 billion yuan (about 195.3 billion won) equity acquisition payment Suning.com was supposed to make, as well as IP royalty fees and arbitration expenses during negotiations.
◇ Both faltered with no synergy… Carrefour shutters one after another
Although Suning.com and Carrefour barely wrapped up the acquisition agreement, the deal turned out to be a poison pill for Suning.com rather than a synergy. Both Suning.com and Carrefour struggled together. According to Caixin, after Suning.com acquired Carrefour, Carrefour's China sales over the past three years (2022–2024) plunged year after year from 255.7 billion yuan (about 50 trillion won) to 208.8 billion yuan (about 41 trillion won) to 139.5 billion yuan (about 27 trillion won).
Carrefour began closing stores in 2023. In just the first half of this year, more than 100 stores shut down. Not only did it pull out of Beijing entirely, but all stores in the major cities of Guangzhou and Shenzhen also ceased operations. Of the five remaining in Shanghai, doors are open, but shelves reportedly are not being properly stocked.
As a result, the 12 subsidiaries Carrefour recently handed off were reportedly in an unmanageable state. As of the end of March, the appraised value of 100% equity and the book net worth of these 12 companies were all negative. For this reason, the sale price was set at the minimum of 1 yuan per company.
By liquidating 12 loss-making corporations in its consolidation financial statements, Suning.com is expected to see a 383 million yuan (about 74.8 billion won) boost to net profit. Suning.com told Caixin it sold Carrefour subsidiaries "to focus on core businesses such as home appliances and 3C (computers, communications, and consumer electronics) and to ease liability burdens."