Chinese retailer Miniso ditches premarket plans to buy stake in Yonghui Superstores By Investing.com

Investing.com — Shares of U.S.-listed Miniso (NYSE: ) fell in pre-market trade on Tuesday after the Chinese retailer said it will acquire a stake in supermarket group Yonghui Superstores ( SS: ).

In early Hong Kong trading, the stock (HK: ) fell to its lowest point since December 2022 and posted its highest one-day percentage since July 2022.

It ended the session at its lowest close since January 2023.

Miniso said it will acquire a 29.4 percent stake in Yonghui for 6.3 billion yuan ($893.1 million) by buying shares from e-commerce titan JD (NASDAQ:).com and DFI Retail Group, listed in Singapore. The stakes will be bought at 2.35 yuan each, equivalent to a 3.1 percent premium to Yonghui’s closing price on Sept. 20.

Yonghui reported three consecutive years of net losses, dragged down by store closure expenses that rose to 8 billion yuan in 2023.

The move comes at a time of deep uncertainty around the Chinese economy, with sluggish domestic consumption weighing on growth in particular and troubling the country’s broader business environment.

In a note to clients, Bank of America analysts said the deal, which makes Miniso Yonghui’s largest shareholder, “raises more questions than answers.”

The deal “increases the company’s risk profile and has a negative impact on investor perception,” analysts said.

In particular, they noted that it remains unclear how Miniso, a global fashion lifestyle goods retailer, and Yonghui, a food and beverage seller, can benefit each other.

“Will there be synergies in the short term? Would such synergies (if there were) justify the investment (…)?” asked the analysts. “We see more uncertainty ahead. Despite the sharp correction in the share price today, we do not believe its current valuation (…) fully mitigates these risks.”

They subsequently downgraded Miniso shares by two notches to “Underperform” from “Buy”.