Investing.com -- US-listed shares in Miniso (NYSE:MNSO) dipped in premarket trading on Tuesday after the Chinese retail chain said it would purchase a stake in supermarket group Yonghui Superstores (SS:601933).
In Hong Kong trading earlier in the day, the stock (HK:9896) slipped to its lowest point since December 2022 and saw its biggest one-day percentage slide since July 2022.
It ended the session at its lowest close since January 2023.
Miniso said it would acquire 29.4% in holdings in Yonghui for 6.3 billion yuan ($893.1 million) by purchasing shares from e-commerce titan JD (NASDAQ:JD).com and Singapore-llisted DFI Retail Group. The stakes will be bought at 2.35 yuan each, equivalent to a premium of 3.1% to Yonghui's closing price on Sept. 20.
Yonghui has reported three consecutive years of net losses, dragged down by expenses related to store closures that climbed to 8 billion yuan in 2023.
The move comes at a time of deep uncertainty surrounding the Chinese economy, with sluggish domestic consumption especially weighing on growth and clouding the wider business environment in the country.
In a note to clients, analysts at Bank of America flagged that the transaction, which makes Miniso the biggest shareholder in Yonghui, "raises more questions than answers."
The deal "increas[es] the company's risk profile and adversely impact[s] investors' perception," the analysts said.
In particular, they noted that it remains unclear how Miniso, a global retailer of trendy lifestyle goods, and Yonghui, a food and beverage seller, can mutually benefit each other.
"Will there be any synergies in the near term? Would such synergies (if any) justify the [...] investment?," the analysts asked. "We see several uncertainties ahead. Despite the steep share-price correction today, we do not believe its current valuation [...] fully discounts these risks."
They subsequently downgraded their rating of Miniso's stock by two notches to "Underperform" from "Buy."