Davis Polk, Freshfields and MoFo take lead on £185m Chinese supermarket deal

Davis Polk & Wardwell, Freshfields Bruckhaus Deringer and Morrison & Foerster (MoFo) have won roles on Chinese supermarket Wumart Stores’s proposed acquisition of a minority stake in Thai retailer CP Lotus for HK$2.3bn (£185m).

As part of the deal, both companies will take minority stakes in each other through a share swap. Through the transaction, Wumart will acquire 36 Chinese stores from CP Lotus.

Davis Polk’s Hong Kong corporate partner Paul Chow led the firm’s team advising Hong Kong-listed Wumart Stores.

Freshfields, fielding Hong Kong corporate partner Edward Freeman, is advising CP Lotus, partly owned by a unit of Thai billionaire Dhanin Chearavanont’s Charoen Pokphand Group.

Ascendent Capital Partners, a China-focused private equity (PE) firm, has facilitated in bringing the transaction to fruition. It will take a minority stake in Wumart when the deal closes and a representative of the PE firm will also join Wumart’s board of directors.

Ascendent Capital Partners turned to Morrison & Foerster for advice on the transaction, with Hong Kong corporate partner Jeremy Hunt leading the firm’s advice. Marcia Ellis, MoFo’s relationship partner with Ascendent Capital, was another key partner involved.

“This transaction is part of an exciting trend toward consolidation in China’s fragmented retail grocery market,” said Hunt. 

The acquisition is subject to regulatory approvals and shareholders’ approval of both Wumart and CP Lotus.

This is the second major combination in China’s retail sector in recent months. Earlier this month, Tesco reached agreements to merge its Chinese business with local retailer China Resources Enterprise. A joint venture between the two companies will combine Tesco’s 134 Chinese stores and its Chinese shopping mall business with China Resources’ 2986 stores.

In this combination, Freshfields, led by London-based relationship partner Claire Wills and Hong Kong corporate partner Simon Weller, advised long-standing client Tesco. China Resources, which recently established its first legal panel (28 June 2013), instructed Reed Smith’s Hong Kong office for advice.