Gome completes purchase of 10.7% stake in Sanlian

Gome Electrical Appliance Holdings Ltd<493>, China's biggest home appliance retailer, has become the biggest shareholder of Shandong Province-based appliance retailer, Sanlian Commerce Co Ltd<600898>, by paying RMB 541 million to the former holder, according to Sanlian's filing with the Shanghai Stock Exchange on Tuesday.

Gome, which acquired the 10.7% stake from Shandong Longjidao Construction Co, aims to promote its sales in Shandong province via the acquisition as Sanlian accounted for approximately 70% market share in the province.

After the deal, Sanlian can share Gome's market resources while operating independently. Gome pledged not to open franchise stores in the province to avoid competing with Sanlian, according to the filing.

Sanlian, which operates more than 100 franchise stores and about 10 outlets in Shangdong, said earlier it was likely to suffer a loss in 2007, against a net profit of RMB1.16 million in 2006. Its Shanghai-traded shares finished up 10.0% to RMB10.65 yesterday.