Chinese conglomerate Dalian Wanda Group Corp. Ltd. will team up with technology giant Tencent Holdings Ltd. and Tencent-backed Gaopeng to set up an internet technology joint venture to integrate online and offline businesses, as the companies set their sights on the "smart retail" sector.
For the joint venture vehicle, Wanda Group's Wanda Commercial Management Co. Ltd will take a 51% stake, while Tencent will own a 42.48% interest. Gaopeng, U.S. daily deals company Groupon Inc.'s former China unit, will hold the remaining 6.52% stake, Wanda said.
Qi Jie, president of Wanda Commercial Management, will take up the post of chairman of the joint venture. Gao Xia, CEO of Gaopeng, will serve as its CEO.
The partnership will leverage resources from the three partners. Wanda's existing internet business, Tencent's online traffic and Gaopeng's businesses — which include electronic invoicing — will be incorporated into the joint venture vehicle.
"For [Wanda flagship retail mall brand] Wanda Plazas, the cooperation will bring in enormous online traffic through WeChat and other platforms, enabling the Plazas to undergo smart upgrades, build a robust membership system and increase the company's overall value," Wanda said. The joint venture will also provide Tencent's online traffic and technology with offline resources and speed up the implementation of its smart retail strategy.
Wanda Commercial Management currently operates 235 Wanda Plazas across Chinese cities, spanning 31.51 million square meters of retail space. The company plans to open 52 new Wanda Plazas in 2018.
"The cooperation with a tech giant will be more efficient for Wanda Plazas to boost online traffic and enhance its client network," Toni Ho, a property analyst at Rhb Osk Securities Hong Kong, told S&P Global Market Intelligence.
Although Wanda will have to share half of its smart retail profits with the other two companies, it will benefit from accelerated development in e-commerce and significantly lower business risks, Ho said.
Wanda's own Wanda Internet Technology Group, which deals with e-commerce and online payment, has not made major progress after its establishment in 2016 due to uncertain business models. Wanda Group Chairman Wang Jianlin suspended its operations and laid off a large number of employees in the past few months, Chinese media outlet The Paper reported May 29.
Financial pressure
Tencent, together with e-commerce retailers Suning Holdings Group Co. Ltd. and JD.com Inc., and real estate developer Sunac China Holdings Ltd., gave Wanda Commercial some reprieve from its debt burdens in January by paying 34 billion yuan for a 14% interest in the latter held by investors who purchased the stake when Wanda Commercial delisted from the Hong Kong bourse in fall 2016.
Wanda Commercial had been under significant pressure to pay these investors back as the company promised the IPO of Wanda Commercial on a mainland Chinese stock exchange within two years, but there has been no substantial progress of a listing so far.
January's capital injection also came amid the Chinese government's tightened scrutiny on Wanda Group's debt-laden overseas deals, making it difficult for the conglomerate to gain access to local bank loans.
Meanwhile, Wanda Group has been selling off domestic and overseas property assets, including developments in Australia and London and its hotel and theme park portfolio in China, in a bid to lower its debt.
However, Wanda's worst times may have passed. S&P Global Ratings revised Wanda Commercial's outlook to stable from negative May 29, citing the company's improved liquidity situation. Wanda Commercial has also fully repaid its US$1.70 billion offshore syndicated loan, the rating agency said.
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As of May 30, US$1 was equivalent to 6.42 Chinese yuan.
