China's Suning targets $7.7b for stand-alone investment arm

Suning said in a regulatory filing that it had established a limited partnership - Suning Dingyuan - that will raise an initial RMB20 billion, contributed by the unlisted parent company and its listed subsidiary, plus a small GP commitment. The rest of the capital will come from third-party LPs.

Suning Dingyuan will pursue equity investments and acquisitions in "forward-looking industries" that support Suning's long-term development, including consumer retail, technology, media and telecom, entertainment, financial services and healthcare. It will be managed by Suning Rundong Equity Investment Management.

The fund will have a lifespan of six years - comprising a four-year investment period and a two-year exit period - with the option to extend by one year. It will charge a 2% management fee plus 20% carried interest, the latter subject to an IRR hurdle of 8%.

Suning has moved aggressively in recent years to prevent e-commerce players consuming its business. In 2012, it responded to JD.com reducing gross margins to zero by offering to match or undercut its pure-play online rival's prices. A year later it introduced an online-to-offline (O2O) mechanism that integrated the entire retail process so that shoppers pay the same price, regardless of whether a product is bought via Suning's e-commerce site or in one of its offline stores.

The company has also made a string of strategic investments designed to extend its online reach. Acquisitions include group buying site Manzuo and online video streaming platform PPTV. The PPTV investment was made in conjunction with Hony Capital, which paid RMB1.2 billion for a minority stake in Suning in 2011.

Last year, Alibaba Group took a 19.99% interest in the company for RMB28.3 billion, while Suning invested RMB14 billion for a 1.1% stake in the e-commerce giant. As part of the deal, Suning agreed to open a flagship store on Alibaba's B2C platform Tmall.com, while its distribution business joined Cainiao, a logistics network established by Alibaba.

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