Wal-Mart Goes Shopping (for Approval)

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Wal-Mart is reported by the FT (and MSNBC) to be the front-runner (with US$ 1 billion) in the bidding for a big mainland (Taiwanese-controlled) China retailer, Trust-Mart (and not just because the name fits…also because it has 100 stores, sales of US$1.4 billion, and as the deal would help the Mart leapfrog Carrefour to become the biggest foreign retailer in China).

However, it is also likely that the Wal-Mart will face “rigorous regulatory scrutiny” for the deal, in line with recent policies on M&A and competition (not to mention attitudes). Boxes will need to be ticked by the Ministry of Commerce (MOC), as well as the National Development Reform Commission (NDRC)

This news comes not long after Wal-Mart’s unionization of its China stores, and I am inclined to agree with Fons Tuinstra at China Herald, who suggests:

    “…it looks like Wal-Mart got a sweetener for its ACFTU [trade union] deal. No proof, just my instinct.”

It would certainly add spice to the explanation (if they end up being approved), which has already included direct intervention by President Hu. However it is also true that this is part of a wider policy to unionize foreign companies.

Whatever the reasoning, it is clear that big foreign companies like Wal-Mart, Carlyle, Morgan Stanley and others, have to take care with their M&A plans, and ensure that the politics – not just the economics – make sense.

It is already happening. Indeed, in the latest news, Reuters reports that:

    “U.S. private equity firm Carlyle Group has agreed to reduce its planned purchase of an 85 percent stake in China’s Xugong Group Construction Machinery Co. to 50 percent”.

Expect more of the same.

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One Response to “Wal-Mart Goes Shopping (for Approval)”

  1. Archive » Taking Stock of Retail Strategies.| China Business Blog Says:

    […] store Trust-Mart chain (which has been brewing since at least October last year, and which may still require official approvals. So much for who is doing what, and where. But what do th […]

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