Chinese Retailer Miniso Dips Premarket on Plans to Acquire Stake in Yonghui Superstores

US-listed shares of Miniso experienced a decline in premarket trading on Tuesday following the announcement that the Chinese retail chain will acquire a stake in supermarket group Yonghui Superstores.

Earlier in the day, the stock fell to its lowest trading point since December 2022 during its session in Hong Kong, marking its most significant one-day percentage drop since July 2022. By the end of the day, it closed at its lowest level since January 2023.

Miniso announced plans to acquire a 29.4% stake in Yonghui for 6.3 billion yuan (approximately $893.1 million) through purchases of shares from JD.com and DFI Retail Group, a company listed in Singapore. The shares will be acquired at a price of 2.35 yuan each, which represents a premium of 3.1% over Yonghui’s closing price on September 20.

Yonghui has faced challenges, reporting three consecutive years of net losses, largely due to expenses associated with store closures that reached 8 billion yuan in 2023.

This acquisition occurs amid significant uncertainty in the Chinese economy, particularly due to sluggish domestic consumption impacting overall growth and affecting the broader business climate.

Analysts at Bank of America raised concerns, stating that the transaction, which positions Miniso as Yonghui’s largest shareholder, “raises more questions than answers.” They noted that the deal could heighten the company’s risk profile and negatively influence investor perception.

The analysts emphasized the uncertainty surrounding potential synergies between Miniso, a global retailer focusing on lifestyle products, and Yonghui, a food and beverage retailer. They questioned whether any possible synergies would warrant the investment and expressed skepticism regarding the stock’s current valuation, suggesting that it does not adequately reflect these risks. Consequently, they downgraded their rating on Miniso’s stock from “Buy” to “Underperform.”