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Friday, 26 November 2021, 22:37 HKT/SGT
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GOME Retail Enters Agreements with GOME Fun and GOME Holding to Accelerate Transformation to All-round Retail Ecosystem Sharing Platform; Strives to Lead "Home Living" Industry

HONG KONG, Nov 26, 2021 - (ACN Newswire) - GOME Retail Holdings Limited (HKEX stock code: 493, "GOME" or "the Company", together with its subsidiaries, "the Group") announced today that the Group entered into 11 agreements in various business sectors, through GOME Appliance Company Limited ("GOME Appliance"), its wholly-owned subsidiary, in respect of the continuing connected transactions of the Company with GOME Fun E-Commerce Co., Ltd. ("GOME Fun") and GOME Holding Group Company Limited ("GOME Holding"). The 11 agreements include renewals and new agreements. All agreements have a term of three years commencing from 1 January 2022 up to and including 31 December 2024 ("Contract Period"). The establishment of the agreements will support the Group's strategic transformation to an all-round retail eco-system sharing platform, steadily promote the in-depth implementation of the "Home Living" strategy, and integrate the supply chains and resources of the Parent Group and other members of the Parent Group to improve the Group's operational efficiency.

Moreover, in order to improve capital efficiency, fully utilize the efficient investment opportunities, and facilitate the Group to build an all-round retail eco-system sharing platform, an indirect wholly-owned subsidiary of the Group entered into a RMB 900million Convertible Bond Investment Agreement with Beijing Pengrun Times Property Management Company Limited ("Beijing Pengrun"), which indirectly holds 100% equity interest of Anxun Logistics Co., Ltd. ("Anxun Logistics"). Please refer to the last two paragraphs of the article for more details.

Purchase and Supply Services Agreement
On purchase and supply services, GOME Appliance has entered into 2022 Master Merchandise Purchase Agreement and 2022 Master Merchandise Supply Agreement with GOME Fun to renew the previous merchandise purchase and supply agreement. Pursuant to 2022 Master Merchandise Purchase Agreement, during the Contract Period, GOME Fun will provide general merchandise (including but not limited to electrical appliances and consumer electronics products) to GOME Appliance upon request. The annual caps of the transaction amounts (excluding value-added tax) shall not exceed RMB28 billion, RMB35 billion and RMB45 billion. Pursuant to 2022 Master Merchandise Supply Agreement, during the Contract Period, GOME Appliance will provide general merchandise (including but not limited to electrical appliances and consumer electronics products) to GOME Fun upon request. The annual caps of the transaction amounts (excluding value-added tax) shall not exceed RMB30 billion, RMB40 billion and RMB50 billion, respectively.

The 2 agreements are expected to greatly improve the efficiency of the Group's procurement of products, enable both parties to source products from their own or the other party's suppliers, expand the scope of procurement to enrich product portfolios, therefore realizing a comprehensive integration and complementation of the online and offline merchandise and satisfying the demand of all potential customers. Moreover, the 2 agreements can ensure the Group to obtain products at the lowest cost possible and on better commercial terms through GOME Appliance or GOME Fun. The arrangement will also minimise the occurrence of shortage of products and achieve better cost optimization.

Logistics and Warehousing Services Agreement
On logistics services, GOME Appliance has entered into 2022 Logistics Services Agreement with GOME Fun and GOME Holding to renew the previous logistics services agreement. During the Contract Period, GOME Holding will provide logistics services (including delivery of general merchandise to end customers) to GOME Appliance and GOME Fun upon request. The annual caps of the transaction amounts (excluding value-added tax) shall not exceed RMB900 million. On warehousing service, GOME Appliance has entered into First 2022 Warehouse Services Agreement with GOME Fun to renew the previous warehouse services agreement. During the Contract Period, GOME Appliance will provide warehousing services (including storage of general merchandise) to GOME Fun upon request. The annual caps of the transaction amounts (excluding value-added tax) shall not exceed RMB900 million. Meanwhile, GOME Appliance has entered into Second 2022 Warehouse Services Agreement with GOME Fun and GOME Holding to renew the previous warehouse services agreement. During the Contract Period, GOME Holding will provide warehousing services (including storage of general merchandise) to GOME Appliance and GOME Fun upon request. The annual caps of the transaction amounts (excluding value added tax) shall not exceed RMB900 million.

The Group's e-commerce platform has been developed rapidly in recent years. Its sales network has spanned across the PRC. Meanwhile, the Group is also expanding its physical store network to the third to sixth-tier cities. Therefore, the upgrade of logistic and warehousing services is necessary to enhance customers purchase experience. The 3 agreements will facilitate the integration of the extensive geographical network among three parties and enable customers to enjoy faster delivery service and better purchase experience which form a distinct competitive advantage of the Group. In addition to the delivery to end customers, the logistics and warehousing services also provide intra-Group logistics covering deliveries between warehouses, between stores and deliveries, from warehouses to stores, etc, providing strategic support to the Group's e-commerce and physical store businesses.

Property Development Management Service Agreement
On property development management services, GOME Appliance has entered into 2022 Property Development Management Services Agreement with GOME Holding to renew the previous property management services agreement. During the Contract Period, GOME Holding will provide property development management services to GOME Appliance upon request. The annual caps of the transaction amounts (excluding value added tax) shall not exceed RMB300 million, RMB400 million and RMB500 million, respectively.

The Group owns properties in multiple regions in China which are intended to be developed into property complex comprising office buildings, stores, warehouses and logistics centers. As the Group lacks the technical expertise and knowledge to manage the development of such property projects while GOME Holding is experienced in managing the development of similar projects, therefore the agreement enables the Group to engage GOME Holding to provide property development management services to those property projects being developed by the Group.

General Service Agreement
On general services, GOME Appliance, GOME Fun and GOME Holding have entered into a new First 2022 Services Agreement and a new Second 2022 Services Agreement. Pursuant to First 2022 Services Agreement, GOME Holding and GOME Fun will provide services including technical services, platform services, software services, supply chain member services, value-added services, inbound marketing services and agent operation services, to GOME Appliance upon request. The annual caps of the transaction amounts (excluding value-added tax) shall not exceed RMB8 billion, RMB12 billion and RMB15 billion, respectively. Pursuant to Second 2022 Services Agreement, GOME Appliance and GOME Fun will provide services including technical services, platform services and inbound marketing services, to GOME Holding upon request. The annual caps of the transaction amounts (excluding value-added tax) shall not exceed RMB10 billion, RMB15 billion and RMB20 billion, respectively.

The 2 agreements will improve the Group's operational efficiency, expand its business scale, empower itself and promote commodity trading by utilising the relevant resources, services and other support of GOME Fun and other sharing and joint development platform companies, so as to enhance the Group's brand influence and improve its sales and profitability. Meanwhile, the rich experiences of GOME Appliance, GOME Fun and the Group in online and offline operation and sales can provide various supports including store opening, marketing, system services to GOME Holding in its businesses such as home decoration, home furnishing, logistics and warehousing, wine industry, etc.

Offline Display Service Agreement
On offline display services, GOME Appliance, GOME Fun and GOME Holding have entered into a new First 2022 Offline Display Services Agreement and a new Second 2022 Offline Display Services Agreement. Pursuant to First 2022 Offline Display Services Agreement, during the Contract Period, GOME Holding and GOME Fun will provide offline display services to GOME Appliance to showcase and display its products at the Parent Group's offline platforms upon request. The annual caps of the transaction amounts (excluding value-added tax) shall not exceed RMB800 million, RMB1.5 billion and RMB2.5 billion, respectively. Pursuant to Second 2022 Offline Display Services Agreement, during the Contract Period, GOME Appliance and GOME Fun will provide offline display services to GOME Holding to showcase and display its products at the Group's offline platforms upon request. The annual caps of the transaction amounts (excluding value-added tax) shall not exceed RMB1 billion, RMB2 billion and RMB3 billion, respectively.

The 2 agreements provide strategic support to Group's transformation into an all-round retail eco-system sharing platform, boost the integration of online and offline platform whereby all online products will be displayed on offline platforms so as to provide users an online and offline full-scene shopping experience.

After Sale Service Agreement
On after sales services, GOME Appliance and GOME Fun have entered into a new 2022 After Sale Services Agreement. During the Contract Period, GOME Appliance will provide after sale and installation services to GOME Fun upon request. The annual caps of the transaction amounts (excluding value-added tax) shall not exceed RMB300 million, RMB400 million and RMB500 million, respectively.

The agreement will supplement GOME Fun's after sale services and facilitate GOME Fun to build omni-linkage retail servicing capabilities, to continuously bring high-quality and convenient service experience to users.

Convertible Bond Investment Agreement
On 26 November 2021, Ningbo Pengxin Xingyu Information Technology Co., Ltd. (the "Subscriber"), an indirect wholly owned subsidiary of the Group, entered into a Convertible Bond Investment Agreement (the "Agreement") with Beijing Pengrun (the "Issuer") which indirectly holds 100% equity interest of Anxun Logistics. Currently Mr. Wong Kwong Yu, the controlling shareholder of the Company, indirectly owns approximately 80.5% equity interests of the Issuer through Rocket Gain Investments Limited and Beijing Wanshengyuan Property Management Co., Ltd which are wholly-owned by him and 19.5% equity interests held by the Subscriber. Pursuant to the Agreement, the Subscriber agreed to subscribe for an RMB900 million convertible bond at an interest rate of 5% per annum for a term of 5 years (the "Bond") from the Issuer, with an option to extend for an additional period of 2 years subject to mutual agreement between both parties. During the term of the Bond, the Subscriber has the discretion to exercise the Option. Upon completion of the exercise of the Option, the Subscriber will hold 30.0% of the Issuer's equity interests and the Issuer will be accounted as an associated company of the Company. The Issuer shall have the right to early redeem the outstanding balance of the Bond together with the interests accrued at any time after the third anniversary of the issue date subject to the Option not having been exercised.

The transaction will generate steady interest incomes to the Group, which will increase its profitability. In addition, the Option would enable the Subscriber to acquire further equity interests in the Issuer timely in future, which in turn owns Anxun Logistics which is expected to achieve rapid growth in the future. Anxun Logistics is a nationwide integrated logistics service provider covering 31 provincial-level administrative regions, regions, more than 700 prefecture-level cities and more than 2,800 districts and counties. It has completed distribution network for more than 42,000 fourth-tier townships across the country. Acquiring Anxun Logistics's equity interests will further reinforce Group's logistic ability, accelerate the Group's strategic transformation towards all-round retail eco-system sharing platform and the implementation of the "Home Living" strategy, which is highly accordant with the Group's development direction.

About GOME Retail Holdings Limited
Founded in China in 1987, GOME Retail Holdings Limited has been listed on the Hong Kong Stock Exchange since July 2004 (stock code: 493) and is a leading technology driven, experience-based, entertainment-oriented and socialized "Home Living" technology retail service provider. Under the guidance of the second phase of its "Home Living" strategy, GOME promotes online and offline integration with Internet technology, supports existing business growth with a strong supply chain, introduces new business with new scenarios, develops a post-service market with Internet of Things technology, drives the refined operation of stores with big data, enhances market competitiveness through network optimization, and raises the retail competitive barrier with strong service capability, and makes all-round efforts to transform from an appliance retailer to a provider of comprehensive "Home Living" solutions. GOME will continue to make use of technology and wisdom to create "authenticity", "speed" and "joy", and establish one of the most popular platform for entertainment-oriented selling and buying with sharing.

Please visit our website for more information: www.gome.com.hk




Topic: Press release summary Sectors: Retail & eCommerce
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