Photo/A.S. Watson Group website

Oct. 26 (NBD) -- Chinese tech giant Tencent Holdings Limited ("Tencent") has teamed up with Yonghui Superstores Co Ltd. ("Yonghui") and Parknshop (China) Investment ("Parknshop") to set up a joint venture to integrate supermarket businesses in China's southern Guangdong province of these two supermarket chain operators.

The joint venture will combine current Parknshop supermarket assets with Yonghui's portfolio in Guangdong and operate existing and new stores under the brand of "Parknshop Yonghui", so as to improve capability of business and asset operations and to bring greater commercial benefits to all parties concerned, Yonghui said in a statement released by the Shanghai Stock Exchange on Thursday.

The formation of the joint venture also marks Tencent's latest push into the brick-and-mortar retail domain. Tencent bought a 5 percent stake in Yonghui in late 2017 and partnered with Yonghui to invest in Carrefour China earlier this year.

A.S. Watson Group's supermarket brand Parknshop currently operates 54 stores in Guangdong. And, Yonghui has a network of over 952 outlets nationwide, 48 of which are located in Guangdong, as per statistics collected in the first half of 2018. A.S. Watson Group is the retail arm of Hong Kong-headquartered CK Hutchison Holdings Limited.

Tencent, through its investment and music app-operating arm Tencent Mobility, will pay around 125 million yuan (18.0 million U.S. dollars) in cash for a 10 percent stake in the joint venture.

Yonghui will make an equity contribution worth approximately 622 million yuan (89.5 million U.S. dollars) to gain a 50 percent stake in the joint venture, while Parknshop will put in 502 million yuan (72.2 million U.S. dollars) with cash and equity contributions for a 40 percent stake.

The Board of Directors of the joint venture will consist of six members, of whom Yonghui has the right to appoint three, Parknshop two and Tencent one. The chairman of the Board will be a Yonghui director, according to Yonghui's statement.

At the joint press conference held on Thursday, Dominic Lai, group managing director of A.S. Watson Group, said Parknshop which has operated in Guangdong province since 1984, Yonghui, a fast-growing retailer, and Tencent which boasts advantages in technology and big data, will deepen the application of Smart Retail in Guangdong through the joint venture.

Zhang Xuanning, founder of Yonghui, set the target for Parknshop Yonghui stores to realize annual sales of 10 billion yuan (1.4 billion U.S. dollars) in Guangdong in years to come.

NBD noticed that the combined revenue from units, which are operated by Parknshop and Yonghui in Guangdong and will be included into the joint venture, totaled approximately 4.1 billion yuan (589.8 million U.S. dollars) in 2017, based on figures from Yonghui's filing to the Shanghai bourse.

Email: gaohan@nbd.com.cn