TPG to lead HK$1.65bn PIPE in Chinese retailer

TPG has teamed up to buy an 11% stake in Wumart with Chinese private equity firm Hony Capital and its parent, Legend Holdings.

TPG is further expanding its portfolio of Chinese companies with a club deal for listed retail chain operator Wumart, which is listed on Hong Kong’s Growth Enterprise Market (GEM).

TPG, along with China’s Hony Capital and Legend Holdings, will invest approximately HK$1.65 billion ($213 million; €150 million) for a 10.95 percent stake in Beijing-based Wumart. Under terms of the agreement, TPG would hold a 6.17 percent stake in Wumart, while Hony would have a 4.16 percent stake and Legend a 0.62 percent stake. TPG and Hony would also each gain a seat on the company’s board.

Wumart: PIPE target

To gain its stake, TPG will purchase about HK$930 million-worth of the company’s H shares at HK$11 per share, while Fit Sports, a Hony affiliate, will buy about HK$170 million-worth of Wumart’s H shares at the same price, according to a Wumart statement. Hony will also purchase roughly RMB384 million-worth of Domestic Shares at RMB9.26 per share, while its Legend will subscribe to about RMB79 million of Domestic Shares.

H shares refer to the company’s ordinary shares with a par value of RMB0.25 each ($0.04; €0.03). They are paid in Hong Kong dollars and listed on the GEM. Domestic Shares are ordinary shares of the company and are paid in RMB.

As domestic investors, Hony and Legend would help Wumart list on the Shanghai or Shenzhen stock exchange within three years of the investment, the company stated.

Based in Bejing, Wumart operates superstores and minimarts across Beijing, Tianjin, Hebei and China’s north western region. The capital raised will be used to expand Wumart’s store network across China as well as fund potential acquisitions, the company said.

Chinese private equity firm Hony Capital is a subsidiary of Legend, an investment holding company backed by the Chinese state.

US firm TPG's most recent deal in China was in May, when it agreed to invest RMB550 million in Daphne International, a Chinese shoe retailer.