Bestore Co., Ltd. (603719.SH), known as the "first stock of high-end snacks," has announced the termination of its control transfer to Wuhan state-owned enterprises after three months of uncertainty. On the evening of October 16, the company disclosed that its controlling shareholder and related parties would no longer proceed with the transfer of control rights.
Three months prior, on July 17, controlling shareholder Ningbo Hanyi revealed an agreement to sell control to Wuhan Yangtze International Trade Group for 12.42 yuan per share, with a total value of 10.46 billion yuan for 21% of the shares. This plan was to be executed in two phases, with a further 8.99% being transferred by the second largest shareholder, Dayong Co., Ltd., owned by Xu Xin.
However, complications arose as the deal prompted legal actions from Guangzhou Light Industry, alleging information disclosure violations. On August 13, Bestore announced a lawsuit concerning the equity transfer dispute, escalating the involved amount from 9.96 billion yuan to 10.23 billion yuan.
As the situation evolved, media and community discussions surfaced over the due diligence that was believed to have progressed between Bestore and Guangzhou Light Industry, questioning the company's transparency during this tumultuous period.
Both potential buyers, Guangzhou Light Industry and Wuhan Yangtze International, are backed by substantial state-owned assets. Guangzhou Light Industry is a leading group with significant contributions to the local economy, while Wuhan Yangtze International boasts a robust supply chain network. The balance of power in negotiations over Bestore’s fate has underscored the competitive nature of emerging retail sectors.
On October 17, Bestore shares closed at 12.38 yuan, down 2.83% from the opening, with a market capitalization of around 5 billion yuan. This value reflects the ongoing uncertainty following the legal disputes that have characterized its recent governance struggles.
The underlying issue stems from governance matters wherein Guangzhou Light Industry claims a binding purchase agreement existed, while Ningbo Hanyi contends that completion was contingent on further due diligence. Legal experts suggest that the eventual ruling will hinge upon interpretations of the original agreement.
As the market attentively observes the unfolding drama, Bestore grapples with declining performance. 2023 saw revenues plummet by approximately 15%, and gross profit margins align and further decline.
This failure not only impacts Bestore's immediate financial health but also reflects the challenges in navigating the evolving landscape of China’s retail sector. With competitive, low-cost snack brands emerging rapidly, Bestore faces profound pressures to innovate and revitalize its business model in a saturated market.
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