Warburg shops for stake in China department store

Warburg Pincus has been identified as one among several investors in talks to buy a stake in Beijing Wangfujing Department Store group in a transaction that could reach $188 million.

Warburg Pincus, The Carlyle Group and the private equity affiliate of Lenovo in China are shopping for a stake in Beijing Wangfujing Department Group in a deal that could reach $188 million, according to a Reuters report.

“Warburg Pincus wants to buy into Wangfujing Department Store, and the two have had several rounds of detailed negotiations,” a source close to the U.S. firm told Reuters.

The source said the government appeared unwilling to cede control of the company to foreigners although Wangfujing’s state parent might sell as much as 25 percent of the chain.

A deal could be concluded in several weeks’ time, according to one source quoted in the report.

Warburg Pincus declined to comment and Wangfujing could not be reached. A source close to Carlyle refuted that the US buyout shop was interested in the Chinese retailer.

China recently introduced new measures aimed at controlling the sale of Chinese companies to foreign investors. Under the new rules, prominent trademarks, companies which generate mainland sales of at least 1.5 billion yuan, and foreign investors seeking 20 percent or higher stakes will need to gain regulatory approvals.

A transaction seeking a 25 percent stake in Beijing Wangfujing, which posted a revenue above 5 billion yuan last year, will likely be subject to the new regulations.

Zheng Wanhe, president of Beijing Wangfujing said in early July the company intends to embark on nation-wide expansion program which will involve merging and acquiring other companies, rather than opening of new stores as planned previously.