Suning Appliance Co yesterday admitted it was in talks with Japanese electrical retailer Laox Co on a possible partnership.

China's second-largest home appliance retailer did not deny a possible equity deal in a statement filed to the Shenzhen Stock Exchange yesterday in response to media reports that Laox is planning to sell shares to Suning. If the deal succeeds, it will be the first time a Chinese company has bought into a leading Japanese electric retailer.

Suning said the two parties are discussing the details of a partnership and industry development after Laox offered to cooperate with the firm.

Japan's Nikkei Business Daily has reported that the Tokyo-listed Laox will issue 1.5 billion yen (US$15.6 million) worth of shares, equivalent to more than 50 percent of its stake. Suning is expected to take 30 percent of those shares, which will get it a seat on the board of Japan's 10th largest electrical retailer.

Laox has been considering restructuring after reporting losses for nine consecutive years. It posted a 52.52 percent drop in net profit in the first quarter.

But Nikkei Business Daily said Suning could learn from Japan's pricing strategy, customer relationship development and efficient store operation.

Suning plans to open more than 200 more outlets on China's mainland this year, giving it more stores than top retailer Gome Electrical Appliances Holding. However, sales per square meter is only one-fifth that of Japan's Yamada Denki.

Nikkei Business Daily also reported that the deal is to be announced next week if the agreement is reached.

Laox was suspended from trading yesterday while Suning dipped 0.6 percent to 16.50 yuan (US$2.41) yesterday in Shenzhen trading.

(Shanghai Daily June 19, 2009)