Sun Art Retail Group, the Chinese venture of French retailer Auchan, is looking to strengthen its position as the country’s largest hypermarket operator.
The company set out its target yesterday (4 July) in the prospectus detailing its planned IPO in Hong Kong.
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The IPO, which is set to see shares in Sun Art listed in Hong Kong on 15 July, could raise up to HK$8.2bn (US$1.05bn). Over 1.14bn shares in Sun Art could be sold at a maximum offer price of HK$7.20.
However, Sun Art said that, based an offer price for the shares of HK$6.43 – the mid-point of the range – it estimates it could raise HK$7.01bn.
Sun Art said it would use half the proceeds to set up “new hypermarket complexes in the People’s Republic of China to further strengthen our leading market position”.
The retailer said it had 197 hypermarkets across China. Sun Art said it had identified or secured 121 locations for further stores and and 51 hypermarkets “under development”.
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By GlobalDataThe company’s turnover in 2010 stood at CNY56.17bn, up 23.7% on the year. Sun Art’s net profit was CNY1.61bn, an increase of 28.7% on 2009.
In its prospectus, Sun Art cited data from Euromonitor that said it held 12% of China’s hypermarket channel. Hypermarkets accounted for 14% of grocery retail sales in China in 2010, Euromonitor said. Sun Art claimed that Euromonitor figures showed that the hypermarket channel would be the fastest-growing grocery retail segment in China between 2010 and 2015.
Sun Art’s nearest competitors in the hypermarket channel are Wal-Mart Stores, which has 11.2% of the market, China Resources Enterprise with 9.8% and Carrefour, which accounts for 8.1% of hypermarket sales.
Of Sun Art’s 197 hypermarkets, 41 are under the Auchan banner. The rest are part of the RT-Mart chain, set up by the French firm’s Taiwanese partner Ruentex Group in 1998.
Auchan opened its first store in China in 1999 and, in 2000, the company set up a venture with Ruentex to operate the two banners. The venture was the forerunner to Sun Art.
Auchan and Ruentex first announced plans for the listing in December in order to take the Chinese retailer “to the next stage of development”, the hypermarket operator said.
After the IPO, a holding company called A-RT will still own at least 51% of Sun Art. Auchan will hold 51% of A-RT.
