Yunfeng joins $817m investment in Suning finance unit
Yunfeng Capital is among 15 investors that have committed RMB5.34 billion ($817 million) for a 16.5% stake in Suning Finance, a financial services subsidiary of Chinese home appliance retailer Suning Commerce Group.
The investment – which values the business at RMB32.2 billion, up from RMB27 billion before the deal – will also see an entity controlled by the parent company and an employee investment program put in approximately RMB2.5 billion for a 9.57% stake. Yunfeng will make the largest third-party contribution, contributing RMB1 billion for a 3.1% interest.
Other commitments will come from renminbi-denominated vehicles managed by the likes of GP Capital, China International Capital Corporation (CICC), China Everbright, and Shenzhen Investment Group, according to a filing. Suning Finance previously received RMB6.67 billion from its parent in January 2017.
The subsidiary started out in 2011 as Suning’s third-party payment services unit. It has since accumulated licenses covering a range of financial services, from consumer credit to insurance, and in 2016 became a stand-alone business unit. Suning Finance will use the new investment to strengthen its human resources and expand its online-to-offline (O2O) services, with a view to offering more services to its parent company’s customer base.
Suning Finance had RMB19.7 billion in total assets as of September. Revenue for the first nine months of 2017 came to RMB1.59 billion while net profit reached RMB371.5 million. This compares to RMB1.82 billion and RMB133.9 million for 2016 in full.
Yunfeng was founded by Jack Ma, founder and executive chairman of Alibaba Group, and David Yu, formerly chairman of Focus Media. In 2015, Alibaba paid RMB28.3 billion for a 19.99% interest in Suning Commerce, 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 Tmall, while its distribution business joined Alibaba's Cainiao logistics network.
Suning has sought to offset the impact of e-commerce players on its core business by establishing a presence in the O2O space and diversifying its operations. The creation of a financial services vertical to leverage its existing customer base mirrors strategic moves made by the likes of Alibaba and JD.com. The company has also set up dedicated units for real estate, media and entertainment, and sports.
Furthermore, in 2016, Suning formed an investment division with a view to reaching RMB50 billion in assets under management. It pursues 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.
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