China Approves Wal-Mart E-Commerce Deal

Despite Wal-Mart’s turbulent run in China, the Arkansas based company has now received approval for its previous bid to raise its stake in an online supermarket. From Reuters:

Wal-Mart had said in February it would raise its stake in online supermarket Yihaodian to around 51 percent by buying into its parent. Wal-Mart did not provide any financial details of the deal.

The acquisition was subject to an anti-monopoly review that was extended several times and finally approved with restrictions after the commerce ministry decided the deal may have a negative impact on competition given Wal-Mart’s and Yihaodian’s leading positions in the market.

“Walmart’s application to increase its investment in Yihaodian, a fast-growing e-commerce website in China, received conditional approval by MOFCOM’s Anti-Monopoly Bureau on August 13, 2012. The transaction remains subject to receipt of applicable regulatory approvals and other closing conditions,” Wal-Mart said in a statement.

The restrictions include: Yihaodian must use its current e-commerce platform for sales; Yihaodian’s parent is not allowed to host third-party transactions on the platform; and Wal-Mart cannot use variable interest entity (VIE) arrangements to conduct telecommunication services currently operated by Yihaodian.

AFP reports that China’s Ministry of Commerce has imposed several conditions on the deal:

Citing concerns over possible exclusion or restriction of competition on China’s value-added telecommunications service market, the ministry imposed several conditions, state-run Xinhua news agency said.

For example, the acquired business cannot use its online platform to provide Internet services for other parties in the deal, Xinhua said, and will be limited to online retailing.

Xinhua said that Yihaodian also offers value-added services.

Wal-Mart officials in China could not be reached for comment.

According to the Wall Street Journal, Wal-Mart did not release the financial details of the transaction:

The transaction remains subject to final closing conditions; Wal-Mart didn’t disclose financial details of the deal.

Business-to-consumer transactions are poised to expand fivefold to 665 billion yuan ($100 billion) over the next two years, according to forecasts from Beijing-based research firm Analysys International. And by 2015, China’s online shoppers are estimated to reach 329 million, more than doubling from 145 million in 2010, with each one spending on average nearly $1,000 online annually, doubling in the same time period, according to consulting firm Boston Consulting Group.

By 2015, e-commerce sales in China will account for 8% of all of the country’s retail sales, up from 3% in 2010, Boston Consulting projects

While Wal-Mart is counting on the boom to help its expansion, others—both with existing bricks-and-mortar stores and without—are flocking to the Web to sell products ranging from cellphones and appliances to clothing and home furnishings.

See also How Wal-Mart is Changing China, via CDT.

August 14, 2012 9:20 AM
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Categories: Economy, Law, Society