(Yicai Global) Aug. 10 -- Chinese maternity supplies producer Aiyingshi will purchase central China’s largest maternal and baby products chain Baby Bear for CNY200 million (USD30.8 million) to expand.

Aiyingshi's board of directors approved the plan, the Shanghai-based firm said in a statement yesterday. The acquisition needs to be given the green light by antitrust regulators.

The buyer can increase its market share and improve its capability to bargain with upstream suppliers through the purchase, it said, adding that its intentions include opening more outlets nationwide. By December 2020, Aiyingshi had 290 stores in China, and most of them in eastern regions.

Changsha-headquartered Baby Bear has widened its clip of losing money this year. Its net loss tallied nearly CNY21.1 million (USD3.3 million) in the first quarter after posting a CNY18.4 million loss in the 12 months of last year. Meanwhile, revenue was CNY220 million in the first three months of 2021 after an annual figure of CNY890 million last year.

Not everyone was in favor of the deal. Liu Sheng, director at Aiyingshi, voted against the acquisition plan, predicting that the purchase can cause asset impairment, according to the announcement.

Slowing Population Growth

More mergers are expected in the sector due to the narrowing client base.

Chinese maternal supplies firms need to scale up and become more efficient to survive as the country's low birth rate is impacting the market, Shi Qiong, chairman of Aiyingshi, told Yicai Global yesterday. Business consolidation in the sector is bound to continue, he added.

But Aiyingshi may not be the next one to hit the headlines. Baby Bear is a big company so it takes a lot of effort for Aiyingshi to purchase it and the firm is not looking for other acquisition opportunities at the moment, Shi added.

Aiyingshi has been doing better this year even though the slowing population growth rate has also affected the firm. In the first quarter, its net profit jumped 26 percent to CNY11.1 million from a year ago. Revenue climbed almost 5 percent to CNY540 million.

In 2020, Aiyingshi's net profit slid 24 percent to CNY120 million from 2019 while its revenue fell 8 percent to almost CNY2.3 billion (USD348.9 million).

Most of the two firms' stores are not in the same areas so they can complement each other in market development, supply chains, and product categories, Aiyingshi's statement added.

Editor: Emmi Laine, Xiao Yi