It does not look good when a company’s founder and major shareholder is behind bars for bribery and insider trading. It looks even less good when the company says it will buy assets from him in a deal that will give him and his friends majority control. And it looks still less good when the company pays an inflated price for those assets.
Tell all that to Gome, a Chinese purveyor of white goods. Yesterday it said it would purchase retailer Artway from incarcerated former chairman Huang Guangyu. The stock fell 15 per cent (albeit in a falling market).
The assets are not bad. Like Hong Kong-listed Gome, Artway sells appliances under the Gome banner. Artway owns 578 shops. The deal will increase Gome’s footprint by half. Gome’s revenue growth has slowed to single-digits in recent years. It could do with a boost. The logistics network is also attractive. Bricks-and-mortar retailers are under pressure from online rivals; beefed-up distribution might help Gome to compete.