Suning.com and Wanda have fallen out.
Zebra Consumer Xu Ji
For 5 billion, ST Suning and Wanda Group have fallen out.
Whether they can recover this huge sum remains uncertain. The company's demand for Wanda to repurchase shares is based on disputed grounds.
This financial dispute is not simple. The battle between these two commercial giants behind the arbitration case is unlikely to be resolved quickly. Perhaps ST Suning is more anxious, as it urgently needs to reverse its performance after four consecutive years of losses.
How will ST Suning resolve this life-or-death situation?
Demanding 5 Billion
Unexpectedly, ST Suning (002024.SZ) made headlines again, this time for demanding debt repayment.
On the evening of October 22, the company announced that it had applied to the China International Economic and Trade Arbitration Commission, requesting an order for Wanda Group to pay approximately 5.041 billion yuan in share repurchase funds to the company and its subsidiary Suning International. Additionally, it requested that Wanda Commercial Management assume joint liability for Wanda Group's payment obligations.
The arbitration application has been accepted, and a notice of acceptance has been received, though the hearing has not yet taken place.
According to the announcement, on January 29, 2018, Suning.com signed a strategic cooperation agreement with Wanda Group and Wanda Commercial Management, designating its subsidiary Suning International to assume the rights and obligations under the agreement. Suning International ultimately held a 4.02% stake in Wanda Commercial Management.
The company claims that Wanda Group and Wanda Commercial Management violated the agreement, triggering the share repurchase clause in the strategic agreement. Their refusal to rectify the situation and delays in repurchasing shares led to the arbitration application.
In 2016, Wanda Commercial delisted from the Hong Kong stock market with plans to return to the A-share market. Facing prolonged delays in relisting, Wang Jianlin introduced strategic investors in 2018, with Suning.com being one of them. Together with other investors, the company took over the shares held by investors during Wanda Commercial's delisting. Subsequently, Wanda Commercial was renamed Wanda Commercial Management.
In 2021, the commercial light assets of Wanda Commercial Management were injected into Zhuhai Wanda Commercial Management, with plans to relist on the Hong Kong Stock Exchange. Over the next two years, Zhuhai Wanda Commercial Management attempted to list four times without success.
In December 2023, Yonghui Superstores (601933.SH) sold its stake in Wanda Commercial Management. In September of the same year, Country Garden Services announced the sale of its stake in Zhuhai Wanda Commercial Management.
Whether these moves by strategic investors influenced ST Suning's decision is unknown. However, external opinions vary.
According to China Securities Journal·CSC Golden Bull, sources close to Wanda stated that Suning.com's repurchase claim is unfounded, and its stake in Wanda Commercial Management has been frozen by public security authorities, making repurchase unfeasible.
Despite this, the company's stock price surged at the opening yesterday, closing at 1.62 yuan, up 5.19%.
Can They Recover the Money?
Zhang Jindong and Wang Jianlin have previously appeared amicable in public. Suning.com once helped Wang Jianlin in a time of need. Now, both of their companies are struggling. Can ST Suning successfully recover this huge sum?
The company also stated in the announcement that, as the case has not yet been heard, the outcome remains uncertain, and its impact on current or future profits is unclear.
Before ST Suning's challenge, Yonghui Superstores had also demanded repayment.
On December 8, 2023, Yonghui Superstores sold its 1.43% stake in Wanda Commercial Management to Dalian Yujin (controlled by Wang Jianlin's friend Sun Xishuang) for 4.53 billion yuan.
However, recovering the payment proved difficult. In July of this year, Yonghui Superstores negotiated with Dalian Yujin, Wang Jianlin, Sun Xishuang, and Yifang Group to divide the remaining 3.839 billion yuan into eight installments, with Wang Jianlin, Sun Xishuang, and Yifang Group providing guarantees.
On October 14, Yonghui Superstores announced that it had applied for arbitration against Dalian Yujin for failing to meet payment obligations, and the application was accepted.
When Wanda Commercial Management restarted its listing plan in 2021, both Country Garden and Country Garden Services (06098.HK) participated in the investment. Their exits were much smoother.
At the end of 2023, Country Garden (02007.HK) sold its 1.79% stake in Zhuhai Wanda Commercial Management. In September of this year, Country Garden Services' subsidiary Country Garden Property Hong Kong sold its 1.49% stake in Zhuhai Wanda Commercial Management to Zhuhai Wanying and Dalian Wanda for 3.142 billion yuan, with Wanda completing the payment on time.
Struggling to Survive
ST Suning's sudden challenge against Wanda may stem more from its own operational difficulties. If it can recover the funds, it could improve its financial statements and help reverse its performance.
The company has been in a loss spiral for the past four years. From 2020 to 2023, its net profits attributable to shareholders were -4.275 billion yuan, -43.26 billion yuan, -16.22 billion yuan, and -4.09 billion yuan, respectively, totaling losses of 67.845 billion yuan.
In the first half of this year, the company recorded a net profit attributable to shareholders of 14.754 million yuan, but a net loss of 530 million yuan after non-recurring items. Revenue fell 24.26% year-on-year to 25.783 billion yuan.
As of June, the company's short-term borrowings and non-current liabilities due within one year were 28.051 billion yuan and 12.658 billion yuan, respectively, while its cash on hand was only 13.861 billion yuan, insufficient to cover the debts.
In August, the company announced plans to sell TTK Express and related receivables. TTK Express has had little presence in the mainstream express delivery market in recent years, and the divestment is a practical move to liquidate assets and raise funds.
The company stated that the sale is expected to increase net profit by approximately 425 million yuan.
As of the end of June, Suning.com had 124 Max and Pro stores in 54 cities across China. In the first half of the year, it opened 75 new home appliance and 3C specialty stores, including 48 in the second quarter, with plans to open or renovate 97 stores in the third quarter.
In the first half of the year, the company added 740 new Retail Cloud franchise stores, expanding its coverage to over 10,000 townships and entering more than 85% of China's county-level markets.
In the current market environment, focusing on offline and lower-tier markets makes Suning.com's turnaround battle an uphill climb.
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