Merger news boosts retailers

SHARES of Shanghai Friendship Group Inc and Shanghai Bailian Group Co jumped by the daily limit of 10 percent after they said they will merge to form Shanghai Bailian Group Co Ltd.
Shanghai Friendship said it will exchange 0.861 of its shares for each Shanghai Bailian's share, according to two separate statements from the companies to the Shanghai Stock Exchange yesterday.
Shanghai Friendship will also buy 36 percent of Shanghai Nextage Department Store and 100 percent of Bailian Investment Group Co through a private placement valued at 4.7 billion yuan (US$705 million). Bailian Investment Group Co owns 21.17 percent of Hong Kong-listed Lianhua Supermarket Holdings Ltd.
Friendship's stake in Lianhua will rise to about 55 percent after the deal. Bailian Group will be delisted from the Shanghai Stock Exchange after the share swap.
Shanghai Friendship closed at 18.57 yuan and Bailian Group ended at 15.05 yuan after they resumed trading following a July 19 suspension.
"The merger with Bailian could make Friendship Group China's largest retailer and its whole year sales could climb to 45 billion yuan this year, while profit will be around 1.13 billion yuan," China International Capital Corporation wrote in a research report.