Bain Capital Agrees To Buy China’s GOME

HONG KONG (Reuters) – U.S. private equity giant Bain Capital has agreed to buy a major stake in China’s top home appliance retailer GOME (0493.HK), beating rival bidders including KKR and Warburg Pincus, a source with direct knowledge of the deal said on Sunday.

The two parties are still finalising financial details at the weekend and an official announcement is expected as early as next week, said the source who declined to be identified as he was not authorised to speak to the media.

“The agreement is signed but there are still lots of things and financial details awaiting to be finalised,” said the source.

On Wednesday, Reuters reported Bain entered into exclusive talks to buy a major stake in GOME, dubbed as China’s Best Buy, after months of competition with other potential investors including Kohlberg Kravis Roberts & Co [KKR.UL] and Warburg Pincus [WP.UL]. [ID:nHKG256749]

Reuters also reported Bain aimed to buy a 20 percent stake by buying new shares in GOME, which would be worth about HK$3 billion based on GOME’s last closing price of HK$1.12 per share.

The 21st Century Business Herald, a leading Chinese-language newspaper, reported on Sunday, citing unidentified sources familiar with the deal, that Bain agreed to buy 18 percent of GOME at a price between HK$1.04 and HK$1.07 per share.

The Chinese newspaper also reported Bain would buy 12 percent of GOME’s HK$4.6 billion seven-year covertible bonds with a 5 percent annual coupon rate.

GOME founder and ex-chairman Huang Guangyu is being investigated by Chinese police for alleged financial misconduct, as GOME seeks new investors to improve its capital base.

GOME’s shares have been suspended since Nov. 24, 2008, following news of the investigation.

Huang, once China’s richest person, and his wife Du Juan, together still hold about 35 percent of GOME’s shares.

GOME plans to issue additional shares in a private placement to Bain, said the source, adding Huang will remain the single biggest shareholder of GOME after the deal.

Representatives for Bain and GOME both declined to comment.

By George Chen