Carrefour and Suning Locked in Legal Battle Over China Stores

Chinese retail giant Suning is currently locked in a legal battle with French retailer Carrefour over a dispute relating to Suning’s acquisition of Carrefour’s China stores. A Hong Kong court has ordered Suning to pay Carrefour more than 1 billion Chinese yuan ($136.7 million).

In 2019, Suning acquired an 80% stake in Carrefour China. Under the agreement, the Carrefour Group retained the right to sell the remaining shares to Suning International at the agreed price. In September 2021, the Carrefour Group issued an equity sale notice to Suning International, mandating that Suning purchase the remaining 20% for the agreed price of 1.2 billion yuan ($164.0 million).

However, changing circumstances have led to a disagreement over the acquisition. The dispute is being handled in accordance with the dispute resolution clause specified in the agreement, and Suning has yet to complete the purchase of the remaining shares.

As early as 2013, the Wall Street Journal reported that Carrefour’s French headquarters was considering selling Carrefour China, but no suitable buyer could be found at the time. In 2019, Suning acquired 80% of Carrefour China for the agreed price of 4.8 billion yuan ($656.1 million). Carrefour China was already facing difficulties at this point, with reported losses of 1.01 billion yuan ($138.1 million) in 2017 and 578 million yuan ($79.0 million) in 2018.

Following the purchase, Suning made significant adjustments to the overall layout of Carrefour stores, overhauled the primary fresh food categories, and replaced the original grocery and textile areas on the second floor of the stores with Suning’s electrical appliances. This transformation led to a temporary recovery, with profits of more than 100 million yuan ($13.67 million) reported for the first half of 2020. Suning then announced plans to cooperate with Carrefour to add children’s play areas and dining canteens while improving fresh food procurement capabilities. However, the good times did not last long, and Carrefour China ended 2020 with reported losses totaling 795 million yuan ($108.7 million).

Following heavy losses, Carrefour China accelerated the pace of store closures. By 2022, 58 stores had been closed, which increased to 106 during the first half of 2023. Store closures are ongoing today, and the Carrefour Group has terminated the licensing agreement that allowed Suning to operate stores under the Carrefour brand.

A spokesperson for Suning said that the company had raised objections to the Hong Kong ruling and confirmed that it had taken legal action against the Carrefour Group regarding losses incurred in the equity acquisition project due to issues related to information disclosure.

Image: Pexels

This article was based on a Chinese article. Read the original article.