After issuing $811 million of bonds and stocks for a series of new outlet purchases and store refurbishments in May, Gome Electrical Appliance Holdings Ltd., China's largest electronics retailer, is out to finance the $3.6 billion acquisition of its Beijing-based rival, Dazhong Electronics Ltd.
With a great amount of uncertainity and regulatory approval involved, Beijing Zhan Sheng Investment Co. will first purchase Dazhong Electronics, whereby Gome Electrical will obtain the option to buy the business later for a minimum of $3.65 billion. In the meantime, Gome Electrical will manage Dazhong Electronics at an arm's length.
Dazhong Electronics' shares will be used as collateral for Gome's loan to Zhan Sheng. After the completion of this acquisition, Gome Electrical will have far greater market share in the industry than its closest competitor, Suning Appliance Co., who retracted its bid for Dazhong Electronics last Thursday.
How do these changes affect consumers buying electronics in China?
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