Reigniting M&A As Consumption Returns

Deals in China’s Retail and Consumer sector: 2019 review and 2020 outlook Reigniting M&A as consumption returns

April 2020 Contents

Foreword 2

Overview 3

Summary of 2019 4

The impact of COVID-19 on China’s R&C sector 8

2020 outlook 10

Review of 2019’s announced transactions 12

• Online retail 13

• Traditional retail 14

• Food & beverage 15

• Hotel, dining and leisure 16

• Sport leisure and textiles 17 Deals valued at over US$500 million in 2019 18 Foreword

Explanation of data shown in this presentation

• The data and analysis presented here are for the China Retail & Consumer (R&C) sector only*. All transactions are equity transactions (excluding asset transactions), unless otherwise stated; • The data presented is based on information compiled by ThomsonReuters, ChinaVenture, public news and PwC analysis unless otherwise stated; • ThomsonReuters and ChinaVenture record announced deals. Some of these may not complete; • The deal volume figures presented in this report refer to the number of deals announced, regardless of whether the deal value is disclosed or not; • The deal value figures presented in this report refer only to those deals where a value has been disclosed (referred to in this presentation as ‘disclosed value’) ； • ‘Domestic’ means China including Hong Kong, Macau and Taiwan; • ‘Outbound’ relates to acquisitions abroad by mainland China companies; • ‘Inbound’ relates to overseas companies acquiring domestic companies; • ‘Strategic buyers’ refers to corporate buyers (as opposed to financial buyers) that acquire companies with the objective of integrating the acquisition into their existing business; • ‘Financial buyers’ refers to investors that acquire companies with the objective of realizing a return on their investment by selling the business at a profit at a future date. These are mainly, but not entirely, PE and VC funds; • Disclosed deal amounts denominated in other currencies are converted into USD amounts at the half year-end exchange rate for the period. *Note: In this report, Agriculture & Livestock, Education and Diversified Consumer Services are not included in the retail and consumer sector.

72 Overview

• 2019 was a solid year for M&A - though deal volume – A 16.67% stake in Guyuelongshan (古越龙山) was and disclosed transaction value were lower than 2018 acquired for a total consideration of Rmb1.14 billion by 5% and 15%, respectively, there were more mega (equity value around Rmb6.85 billion) by Shenzhen deals and the average size of disclosed transactions Qianhai Furong Asset Management Co., Ltd. (深圳 increased. Domestic deals by corporate investors in 市前海富荣资产管理有限公司) and Zhejiang Yingjia traditional retail, and outbound deals in food and Tech Co Ltd. (浙江盈家科技有限公司) ; beverage, as well as hotel, dining and leisure, all saw – Heytea has completed round D financing from higher disclosed transaction values. Hillhouse and Coatue, valuing it at Rmb16 billion;

• Q1 2020 marked an abrupt downturn: a roughly 70% – Perfect Diary also completed a new round of decline in disclosed deal value and volume compared financing from Hopu and Tiger Capital China, to the same period in 2019. Nonetheless, there have valuing it at US$2 billion. still been some significant deals, demonstrating confidence in the R&C sector on the part of some • Looking forward, we remain optimistic about the investors: medium-to-long-term prospects for deals in China‘s retail and consumer sector. We expect deals to – PepsiCo Inc. announced its acquisition of Be & rebound in 2020 once COVID-19 starts to come under Cheery (one of the largest online snack companies control. Deals will revolve around the themes of ‘new in China) for US$705 million; retail’, ‘pursuit of health & wellness products’ and – Sequoia Capital China invested over Rmb1.2 billion ‘consolidation / supply chain optimization’. in Junlebao (君乐宝) to become its largest institutional shareholder with a 15.26 percent stake;

73 Summary of 2019 (1/4)

The impact of Government policy on Outbound deals to acquire overseas retail brands and to expand business Government policy guidance has had a significant impact footprints on the retail sector in the past year. Opinions issued by the Online retailers continue to go global in their search for General Office of the State Council have touched on quality targets worldwide. They are acquiring good foreign developing the distribution and logistics industry and brands and market access through outbound deals to promoting consumer spending. Together with the latest enhance their product offering. The total value of outbound round of reforms to individual income tax (which will boost transactions in 2019 was similar to 2018, but volume was disposable income), these policies ensure that consumer up 19%. Major deals included CK Hutchison’s acquisition spending will continue to be one of the major drivers of of Greene King, a British brewery and pub operator, Ctrip’s China’s economy. investment in MakeMyTrip, the largest tourism website in China has been one of world’s largest consumer markets India, and Mengniu Dairy acquiring Bellamy, an Australian in recent years, with domestic consumption an milk powder brand. Chinese enterprises are growing their increasingly important contributor to economic growth. global footprint and expanding their overseas supply While the macroeconomic environment remains chains through such deals. challenging, the huge population base, with a growing As trade tensions between China and the United States middle class, accelerating urbanisation and a varied retail escalate, more Chinese retailers and consumer goods environment, promotes the development of consumer enterprises are looking at other developed markets for choice and encourages consumers to trade up. A new acquisition targets. Asia, Europe and Oceania are the generation of consumers want convenient, healthy and most popular target markets for Chinese buyers at this personalised products and services. stage.

Closer integration of new and traditional Despite market headwinds, PE retail investors remain active The new retail business model is predicated on online and Amid ongoing economic and political uncertainties, private offline integration. The growth of this model, along with equity investors have been cautious, as evidenced by the strong demand for high-quality products and foreign reduction in deal volumes (notwithstanding mega brands, has provided greater impetus to M&A activity in transactions such as HillHouse Capital’s acquisition of China's retail and consumer sector. Gree Electric Appliances). The accelerating transformation of traditional retailers such But while there was an overall decline in private equity as supermarkets has led to major transactions, including transactions in 2019, PE investments in online retail, hotel, Suning’s acquisition of Carrefour’s China business and dining and leisure rose steadily, reflecting a growing focus Wumart’s acquisition of Metro (China), with Dmalls on ‘new retail’. PE investments represent a becoming Metro's technology partner in China. Traditional disproportionately high share (84%) of online retail. retail and e-commerce have seen deepening integration of their supply chains, facilitating the development of an omni-channel consumer proposition. Fresh food is a key focus, with Tencent and Meituan Capital completing their investment in Yipien.Fresh so that they can each bring their strengths to the supply chain. We expect such online and offline integration to continue and deepen further.

4 Summary of 2019 (2/4)

Deals volume Deals size Average size of transaction

976 M&A transactions The scale of transactions Affected by mega occurred in 2019, disclosed in 2019 transactions, the average compared with 1032 in reached US$49.7 billion, transaction value in 2019 2018 — 5% decrease compared with US$58.6 was approximately US$83.5 million, compared with billion in 2018 — 15% US$74.4 million in 2018 — decrease 13% increase

Mega deals Main businesses Review of M&A In 2019, there were 17 The most popular deals with a value over in China’s retail US$500 million, for a total businesses for investment value of approximately and consumer and financing are mainly US$24.3 billion (14 sector in 2019 where consumers upgrade transactions in 2018, with their spending, such as a value over US$14.1 online retail, hotel, dining billion) and leisure.

Major Outbound Overseas investors deals investment regions Financial investors’ (PE The total volume of More than 65% of funds) domestic deals are outbound transactions in overseas investment still the main investments, 2019 was 113, up from occurred in developed followed by domestic 95 in 2018 — 19% markets in Europe (UK, corporate and outbound increase Germany, France) and deals. parts of Asia (e.g. India).

5 Summary of 2019 (3/4)

Size of China M&A Deals in R&C (2016 to 2019)

US$ in billions US$ in millions Share of total $ 64.8 billion 12% 70 100 24% 89.9 $ 58.6 billion 7% 90 7 60 74.4 83.5 2016 5 75.3 80 20% 8 $ 49.7 billion 50 70 24% 13 11 9 $ 39.6 billion 60 13% 40 4 4 9 6 50 4 Share of total 30 3 9 12 40 25% 18% 16 8 8 20 30 8 8 10 20 9% 2019 10 16 14 10 10 12 15% - - 18% 2016 2017 2018 2019 15%

Sport leisure and textiles

*Note: Outbound deals also include outbound investment from financial investors; as some transactions have undisclosed value, the transaction value cannot be compared directly with M&A deal volume in next graph. Source: Thomson Reuters, Investment China and PwC analysis

Number of China M&A Deals in R&C (2016 to 2019)

No. of transactions Share of total 7% 1,200 11% 1,032 31% 1,009 976 7% 1,000 65 98 2016 116 114 784 135 16% 800 63 127 28% 58 142 166 117 163 600 82 187 Share of total 157 12% 287 124 400 26% 214 13% 161 228 2019 200 314 256 252 16% 17% 175 - 2016 2017 2018 2019 16%

Sport leisure and textiles

*Note: Outbound deals also include outbound investment from financial investors; as some transactions have undisclosed value, the deal volume cannot be compared with disclosed value in previous graph. Source: Thomson Reuters, Investment China and PwC analysis

6 Summary of 2019 (4/4)

2019 deal size by subsector

SportTextiles leisure and and garments textiles 12% 51% 26% 11%

Hotel, dining and leisure 2% 10% 40% 30% 17%

Food & beverage 2% 13% 33% 38% 14%

Traditional retail 1% 13% 35% 39% 13%

Online retail 3% 26% 36% 27% 8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

US$ > 1 bn 100-1,000 m 10-100 m 1-10 m <1 m

Source: Thomson Reuters, Investment China and PwC analysis

2019 deal volume by investor type

SportTextiles leisure and and garments textiles 13% 33% 50% 4%

Hotel, dining and leisure 9% 58% 31% 2%

Food & beverage 15% 20% 62% 3%

Traditional retail 16% 30% 50% 4%

Online retail 7% 84% 8% 1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Outbound deals Domestic deals by financial investors Domestic deals by corporate investors Inbound deals

Source: Thomson Reuters, Investment China and PwC analysis

7 The impact of COVID-19 on China’s retail and consumer sector (1/2)

Overview Since COVID-19 was first detected at the end of 2019, it has dominated global attention due to high rates of transmission, its severity and the lack of therapeutic drugs or vaccines. The Chinese government took strong measures to control it in a short period, including extending the Spring Festival holiday, limiting the flow of people in the epidemic area, and encouraging enterprises to work flexibly so as to reduce the further spread of the virus.

Recently, the epidemic has been brought under control in China, with most cities having returned to pre-epidemic normalcy, but they are still on the alert for imported cases, given its rapid spread overseas.

The epidemic has transformed online consumer behaviour. Online penetration and home delivery are expected to increase rapidly, with the leading businesses further expanding their market share. At the same time, changes in grocery shopping frequency (e.g. stocking up to minimise contact) and Reduced movement of people during the type have increased the basket price, which is epidemic, suspension of domestic tour expected to solve the pain point of high distribution groups and the closure of places for costs to improve the profitability of online retailers. social functions have had a great impact on the hotel, dining and leisure sectors. With their large fixed costs, small and medium-sized hotels and restaurants are facing severe challenges. Online retail

Hotel, Traditional The short-term impact of the dining and epidemic on physical shops retail Retail & consumer is expected to be sectors leisure considerable, particularly for luxuries or treats. After the epidemic, traditional retail in multiple sectors has rebounded to close to pre- Food and epidemic levels. The beverage The epidemic has had a short-term epidemic has accelerated impact on the gift segment and premium the pace of online and offline focused F&B, such as tobacco and integration and the alcohol, but a limited impact on meat, development of multi- convenience foods, seasonings, and channel propositions. dairy products.

8 The impact of COVID-19 on China’s retail and consumer sector (2/2)

The impact of the epidemic on deals Hotel, dining and leisure Online and traditional retail The hotel and dining sectors were the hardest hit in this epidemic, with many facing cash flow challenges and some After the epidemic, online consumer habits are expected to smaller players struggling to survive. Sectors such as on- gradually penetrate into second and third tier cities. Greater premises dining, entertainment, tourism, and discretionary integration between online and traditional retailers will spending on luxury products will continue to be under generate deals activity in the short term. pressure. We can expect a ‘flight to quality’ favouring the During the crisis, weaknesses were evident among some strongest, and possibly leading to market consolidation. players (e.g. delivery / supply chain management). As Food and beverage online retail becomes more competitive, the big question will be how to better analyze consumer behavior through The short-term impact of the epidemic will be conducive to data analytics and precise segmentation. Offline players industry consolidation. For example, leisure / health foods who have experienced significant growth in online demand with online channels such as Three Squirrels (三只松鼠) but struggled with fulfilment may want to develop their standing out in the epidemic. The leading brands are omni-channel offering. Such traditional retailers who expected to increase their domination. achieve a tech-enabled transformation may be highly favored by investors.

9 Outlook for 2020 (1/2)

Consumer-led growth will fuel deals Strategic alliance with domestic

After rapid growth in 2018, deal activity in 2019 was steady investors despite market uncertainty. Given this context, we maintain Traditional offline retailers will continue to cooperate with a long-term optimistic view for deals in China's retail and leading domestic Internet firms to increase supply chain consumer sectors. capacity and resilience, improve their logistics and overall Amid global economic uncertainties and Sino-US trade consumer experience, and meet the demands of a new tensions, China's economy will depend more and more on generation of consumers seeking to go upmarket. In this consumer-led growth. In the medium-to-long term, this will environment, we expect traditional retail, food and continue to drive deals growth. beverage, hotel, dining and leisure to be hot sectors for domestic strategic investors in 2020. The ‘Black Swan’ event of the epidemic in early 2020 hit the hotel, dining and leisure sectors relying on offline Inbound deals from overseas services, as well as traditional retail sectors selling strategic investors to facilitate their discretionary products. They have all faced severe challenges, including liquidity risks. We expect businesses transformation in China in this sector to seek equity financing in the second half of Despite economic uncertainties, China continues to be one of 2020. The epidemic will also speed up the integration of the most important consumer markets in the world. Overseas online and offline retail and encourage investment in the strategic investors will continue to focus on the Chinese merger of new and old formats of retailing. The epidemic market and realise their China strategies through closer disrupted people’s lifestyles. Some may not return to their cooperation with local businesses. Searching for digital / old ways, with an impact on the long-term development of omni-channel players and wellness products will help the retail and consumer sector. overseas investors to transform in China as well as potentially to export some of these products and business models overseas and diversify their product portfolios. For example, in the first quarter of 2020, PepsiCo Inc. announced its acquisition of Be & Cheery, one of the largest online snack companies in China, for US$705 million. We expect inbound deal activity to rise steadily after the pandemic passes, especially in products and industries that meet the needs of the middle classes.

10 Outlook for 2020 (2/2)

Outbound deals seeking quality brands Financial investors (private equity and products funds) more active in high-growth / We expect outbound deals activity in 2020 to increase innovative sectors once COVID-19 has been contained: Financial investors will be more active in 2020: • The COVID-19 outbreak at the beginning of 2020 affected cross-border mobility and impacted outbound • In 2019, PE investments in China fell amid investor deals activity in the short term; caution. However, as new policies continue to encourage investment in innovative sectors (e.g. • However, in the medium to long term, i.e. once the facilitating an exit in China’s Science and Technology epidemic impacts fade away: Innovation Board (科创板)), financial investors' enthusiasm for domestic targets will likely be restored. – Chinese retail and consumer goods companies and At the same time, the gradual return of domestic market brand owners (especially private enterprises) will valuations to a more reasonable range will encourage continue to acquire overseas quality brands to meet financial investors to be more practical about domestic the rapidly growing middle class demand in China. targets; Through deals, domestic enterprises will acquire overseas upstream assets and introduce high- quality brands and products for the Chinese middle • In addition to deals in China, financial investors are class. increasingly involved in outbound deals, including in cooperation with strategic investors; – The private enterprises represented by Haidilao (海底捞) will go global, continue their overseas • PE funds will continue to focus on high-growth online expansion and integrate into local markets by and new retail, dining and leisure, and other consumer acquiring mature overseas brands. upgrade sectors. – The signing of the first phase of the Sino-US trade agreement and the ongoing Brexit negotiations have The recent Luckin Coffee incident will lead to more provided more opportunities for Chinese outbound stringent due diligence and will heighten doubts about new deals. However, in recent years, political sensitivity in business models. If lack of trust impairs the stock some countries to large cross-border transactions has performance of Chinese players in the US, they may been high. This will continue to create uncertainty for consider delisting and relisting in HK or Mainland China. outbound deals by Chinese retail and consumer Financial investors will play a significant role in this firms. process. The ability of new economy businesses to – There will be a shift towards deals that can secure demonstrate profitable growth and a sustainable path to upstream raw material and health & wellness products, profitability will command a premium. rather than more discretionary products.

We remain optimistic about medium-to-long- term prospects for deals in China's retail and consumer sector. 11 Review of deals in 2019 by segment

12 1 Online retail

Online retail deals value（2016 to 2019）

US$ in millions

18,000 Total value: $ 15.78 billion Volume:314 16,000 Total value: $ 14.11 billion 1,194 Volume: 256 14,000 Total value: $ 12.21 billion Volume: 252 3,408 12,000 Total value: $ 9.66 billion 6,927 1,799 * Volume:175 48 10,000 669 1,272 2,883 2,355 8,000 1,245

6,000

4,000 7,661 7,174 7,771 7,389 2,000

- 2016 2017 2018 2019

Domestic deals by financial investors Domestic deals by corporate investors Inbound deals Outbound deals

*In 2016,there were mega transactions among domestic companies — JD acquired YHD; MOGU Inc. acquired Meilishuo and privatization of Dangdang Network. Note: Outbound deals also include outbound investment from financial investors; as some transactions have undisclosed value, there is no corresponding relationship with the volume of transactions. Source: Thomson Reuters, Investment China and PwC analysis

Brief review of deals for online retail in 2019

1. Market activity on CARS and JD. At the same time, Toyota, as an overseas investor, invested US$600 million in cooperation Online retail is one of the most active segments for with Didi in the field of smart mobility services. transactions. Both the volume and value in 2018 and 2019 surpassed traditional retail. Overall activity in 2019 was 5. Outbound deals broadly unchanged from 2018, and the disclosed transaction With a slowdown in overall economic growth, Chinese value was down 15% from the prior year. internet companies have sought to increase their market 2. Investors share through overseas acquisitions. Under the influence of Alibaba’s US$2 billion investment in Southeast Asian e- Financial investors are the main drivers of online retail commerce platform Lazada and other large transactions in transactions. In 2019, the value of domestic transactions 2018, the volume of outbound deals by privately-owned from financial investors reached US$7.39 billion, similar to enterprises (POEs) and financial investors increased by previous years. The target companies for financial 38% compared to the previous year but the disclosed investment in 2019 were concentrated in e-commerce in transaction value decreased by 47% in 2019. used cars, daily necessities, and health and pet sectors. 6. Key overseas markets and targets 3. Deal size Asia (e.g. India) continues to be the key strategic region The average deal size by financial investors has remained for financial investors and Internet giants. The target stable — concentrated in the million and tens of millions of companies for outbound deals in 2019 were concentrated USD. Outbound deals by Chinese companies averaged among the logistics, travel and e-commerce sectors. USD10 million. The proportion of transactions above USD100 million has increased since 2H2018. 7. IPO volumes 4. Major transactions A-share markets (2)；Hong Kong Stock Exchange (1)； U.S. stock markets (4) Mega deals of more than USD1 billion in 2019 came from Alibaba’s acquisition of NetEase Koala, and new financing 13 2 Traditional retail

Traditional retail deal value（2016 to 2019）

US$ in millions

18,000 Total value: $15.84 billion Volume: 287 16,000

14,000 3,913 Total value: $10.47 billion 12,000 579 Volume: 228 10,000 2,301 Total value: $7.8 billion Total value: $7.61 billion Volume: 214 Volume: 161 8,000 7,323 210 769 4 398 373 6,000 3,380 4,559 4,000 5,108

2,000 4,028 4,583 2,464 1,732 - 2016 2017 2018 2019

Domestic deals by financial investors Domestic deals by corporate investors Inbound deals Outbound deals

Note: Outbound deals also include outbound investment from financial investors; as some transactions have undisclosed value, there is no corresponding relationship with the volume of transactions. Source: Thomson Reuters, Investment China and PwC analysis

Brief review of deals for traditional retail in 2019 1. Market activity 4. Major transactions Traditional retail is second only to online in terms of deals Online retailers continue to seek and incorporate offline volume, but it has been decreasing year after year since channels. Typical transactions included Alibaba's stake in 2016. The volume of deals in 2019 dropped by a further Red Star Macalline and JD.com's stake in Jiangsu Five 25% compared to 2018. The value of transactions Star. At the same time, traditional retail has accelerated disclosed in 2019 declined slightly from 2018, due to the the transformation of supply chain and product categories, impact of two large transactions that year. and flagship projects such as Wumart and Dmall’s 2. Investors acquisition of Metro China, Suning’s acquisition of Carrefour (China) have emerged. Deals between domestic companies and domestic financial investors still dominate this segment, accounting for more 5. Outbound deals than 80% of deals in traditional retail. In 2019, the targets Private companies continued to dominate outbound deals for deals among domestic companies were concentrated in in traditional retail. Due to uncertainties such as more the supermarket, food and edible oil sectors and the stringent supervision and government approval automotive specialty retail sector; the targets for financial procedures, the outbound deals market continues to slow. investments were concentrated in the specialty retail 6. Key overseas markets sector, such as furniture and domestic appliances. Asia (e.g. Japan) and Europe (e.g. UK) have become the 3. Deals size key areas for outbound deals by Chinese retailers. Transactions were mostly small and medium-sized, but there 7. IPO volumes were three very large transactions of more than US$500 A-share markets (1); Hong Kong Stock Exchange (5); U.S. million in 2019. stock markets (3)

14 3 Food and beverage

Food and beverage deal value（2016 to 2019）

US$ in millions

14,000 Total value: $11.88 billion Volume: 187 12,000 1,694 10,000 Total value: $8.51 billion Total value: $8.42 billion Volume: 166 Volume: 124 Total value: $7.59 billion Volume: 157 8,000 1,117 4,108 353 2,087 39 6,000 2,570 3,344

4,000 3,916 146 5,662 2,932 2,000 4,470 2,162 1,165 - 629 2016 2017 2018 2019

Domestic deals by financial investors Domestic deals by corporate investors Inbound deals Outbound deals

The inbound M&A of foreign investors in 2018 were mainly Heineken's acquisition of 40% of China Resources Snow Beer for HK $ 24.35 billion and the acquisition of Sichuan Shuijingfang. Note: Outbound deals also include outbound investment from financial investors; as some transactions have undisclosed value, there is no corresponding relationship with the volume of transactions. Source: Thomson Reuters, Investment China and PwC analysis Brief review of deals for food and beverage in 2019 1. Market activity open up the organic baby food business for Mengniu and After excluding the impact of large deals such as Heineken's promote its penetration into China's infant formula market. acquisition of China Resources Snow Beer, the value of deals At the end of the year, COFCO announced that it plans to in the food and beverage segment in 2019 was similar to de-list China Agri Holdings from the Hong Kong Stock 2018, but volume was down 16%. Exchange in the interests of flexibility. 2. Investors 5. Outbound deals Deals from domestic companies and financial investors Private enterprises have always dominated outbound accounted for more than 80% of the transaction volume in deals in the food and beverage segment. They seek to this segment. In 2019, major outbound deals pushed up obtain high-quality overseas brands and channels through the industry's overall disclosed transaction value; the deals. Private enterprises were particularly active in targets of deals were concentrated in the dairy, spirits (i.e overseas transactions in the food and beverage segment 金徽酒) and Fast Moving Consumer Goods (FMCG) in 2019. There were five transactions of more than sectors. USD100 million and the value of deals doubled from 2018. 3. Deals size 6. Key overseas markets Deals among domestic enterprises and financial investors Europe (e.g. UK, France and Spain) and Australia were are mostly small and medium-sized. the most active regions for Chinese food and beverage companies’ outbound deals in 2019. 4. Major transactions 7. IPO volumes Private equity funds acquired Godiva’s businesses in Japan, South Korea, Australia and New Zealand in 1H19. A-share markets (8); Hong Kong Stock Exchange (2); U.S. In addition, Mengniu Dairy’s acquisition of Bellamy will stock markets(1)

15 4 Hotel, dining and leisure

Hotel, dining and leisure deals value（2016 to 2019）

US$ in millions

14,000 Total value: $12.69 billion Volume: 63

12,000

Total value: $8.71 billion 10,000 6,686 Volume: 163

8,000 Total value: $5.84 billion Volume: 142 6,000 0 5,098 1,106 Total value: $3.22 billion 2,820 4,000 Volume: 82 582 0 3 1,086 4,900 - 803 2,000 948 2,445 2,211 188 1,573 - 2016 2017 2018 2019

Domestic deals by financial investors Domestic deals by corporate investors Inbound deals Outbound deals

Brief review of deals for hotel, dining and leisure in 2019 1. Market activity 4. Major transactions The rapid growth of China’s middle class has led to In 2019, CK Hutchison Holdings acquired British brewery consumers upgrading their spending. Although there were no and pub operator Greene King, and Ctrip reached a mega deals like those in 2016*, transaction activity increased cooperation agreement with MakeMyTrip in India to significantly in the hotel, dining and leisure segment in 2019. strengthen its outbound travel business. The value and volume of transactions increased by 49% and 5. Outbound deals 15% respectively compared to 2018. In addition, in 2019, In 2019, private enterprises were particularly active in there were two mega transactions over US$1 billion, which overseas transactions, with transaction volumes increasing pushed up the transaction value of the hotel, dining and by 150% year on year. The targets of deals were scattered leisure sector. among the hotel, dining and tourism sectors. 2. Investors 6. Key overseas markets Financial investors have become dominant players in Outbound deals were concentrated mainly in Asia (e.g. overseas acquisitions in the hotel, dining and leisure segment. India) and Europe (e.g. UK,). While Chinese enterprises’ 94 domestic transactions in 2019 involved financial investors outbound deals have made a shift from the United States (accounting for 58% of total transaction volume), compared to Oceania amid the Sino-US trade war, we saw a number with 93 in 2018 and 42 in 2017. of diversified acquisitions of catering companies such as 3. Deals size Haidilao in the United States. The proportion of transactions worth over US$10 million 7. IPO volumes from financial investors has increased. The volume of Hong Kong Stock Exchange (7); U.S. stock markets (1) outbound deals by private enterprises is mainly medium and large in size.

*For example: Private equity fund Ocean Imagination acquired Qunar for USD 4.59 billion and Anbang Insurance Group acquired US Strategic Hotels for USD 6.5 billion.

16 5 Sport leisure and textiles

Sport leisure and textiles deals value（2016 to 2019）

US$ in millions

12,000 Total value: $10.73 billion Volume: 135

10,000

8,000 5,615

6,000 Total value: $4.56 billion Total value: $4.25 billion Total value: $4.26 billion Volume: 114 Volume: 117 49 Volume: 127 389 158 4,000 254 2,156 776 681 44 2,001 1,920 1,638 2,000 2,906 2,012 1,393 1,808 - 2016 2017 2018 2019

Domestic deals by financial investors Domestic deals by corporate investors Inbound deals Outbound deals

Brief review of deals for sport leisure and textiles in 2019

1. Market activity 4. Major transactions After excluding the impact of mega outbound deals in The rapid growth of the middle class has led to consumers 2018*, the transaction value of deals in the sport leisure moving upmarket. In 2H18, Anta spent more than US$5 and textile segment in 2019 was at a level similar to that in billion to acquire the Finnish sports brand Amer Sports. In 2016 and 2017. 2H2019, Anta sold some of Amer Sports' equity and 2. Investors introduced strategic partners such as Sequoia Capital. In 2019, large-scale transactions over US$200 million The value of deals among domestic enterprises declined, included Xtep’s acquisition of E-land Footwear. while that from financial investors reached a peak in 2018, falling by 38% and 24% in 2019, and the volume of 5. Outbound deals transactions was down 14% and 6%, respectively. In 2019, Private enterprises were the absolute driving force in the targets of financial investors' domestic investment were outbound deals in this segment. 2019 saw 14 outbound mainly in the home textiles and clothing sector, while the deals by private enterprises and 3 outbound deals by targets of deals among domestic enterprises were financial investors. concentrated in the garments sector. 6. Key overseas markets 3. Deals size Europe (e.g. Germany and France) and America are the Deals in the sport leisure and textiles segment between most sought after regions for outbound deals in the sport financial investors or domestic companies are mainly in the leisure and textiles segment. range of tens of millions of USD. Except for one very large 7. IPO volumes transaction in 2H18, mega deals of more than US$1 billion Hong Kong Stock Exchange (7) were rare.

*Mainly due to Anta's acquisition of Finnish sports brand Amer Sports for more than US$5 billion

17 Deals valued at over US$500 million in 2019 (1/3)

NO. Target Industry Investors Publication Deal value Description company date （USD bn）

1 Gree Electric Consumer Hillhouse 2019.10.29 5.92 In the context of the reform of Appliances goods Capital state-owned enterprises, Hillhouse Capital spent about Rmb41.7 billion to acquire a 15% stake in Gree Electric Appliances, becoming the largest shareholder.

2 Greene King Hotel, dining CK Hutchison 2019.08.19 3.2 CK Hutchison Holdings proposed a ₤2.7 and leisure Holdings billion bid for British pub operator Greene Limited King, which is listed on the London Stock Exchange. Greene King is a leading brewery and pub operator with over 2,700 pubs, restaurants and hotels in England, Wales and Scotland.

3 Metro Traditional Wumart 2019.10.11 2.09 Wumart Group and Multipoint Dmall acquired (China) retail Group 80% of Metro's China at a valuation of 1.9 billion Euros. Wumart Group transforms its new retail and further expands its business through the operation of digitalization, new store openings and other growth initiatives. Metro is undergoing new retail transformation, providing online and offline integrated digital retail solutions, which is exactly what Metro (China) needs.

4 NetEase Koala Online retail Alibaba 2019.09.05 2 Alibaba Group acquired NetEase's cross- Group border e-commerce platform Koala for $2 billion. NetEase Koala is to merge with Tmall International, and the Koala brand will continue to operate independently.

5 CARS Online retail SoftBank 2019.02.27 1.5 CARS, the parent company of Guazi.com Vision Fund and Maodou.com, completed a new round of financing of US$1.5 billion. The investor is Vision Fund. After the completion of this series-D funding, CARS is valued at more than $9 billion, ranking first in the automotive consumer services sector.

6 MakeMyTrip Ltd Hotel, dining Ctrip 2019.04.26 1.4 Ctrip has reached an agreement with South and leisure Africa's largest media group, Spas Naspers, to exchange shares of Makemytrip, an Indian online travel company held by Naspers, and become the largest shareholder of Makemytrip. This is also a big step for Ctrip to penetrate into the Indian travel market.

7 China Food and COFCO Hong 2019.11.28 1.14 COFCO plans to de-list China Agri-Industries Agri-Industries beverage Kong Holdings from Hong Kong Stock Exchange. Holdings Limited China Agri-Industries Holdings is engaged mainly in the processing and sales of oilseeds, rice, wheat and beer raw materials. It has a wide range of products and has established well-known national brands such as Fulinmen and Xiangxue.

Source: Public information, Thomson Reuters, Investment China and PwC analysis

18 Deals valued at over US$500 million in 2019 (2/3)

NO. Target Industry Investors Publication Deal value Description company date （ USD bn）

8 JD Health Online retail Citic 2019.05.10 1 JD Health received more than USD 1 billion in Capital,CICC Series-A funding, led by a number of and Baring domestic and foreign investment companies. Asia Private Relying on the strengths and resources of JD Equity Group, JD Health will gradually improve the “Internet + medical health” proposition based on the existing four business lines of pharmaceutical retail, pharmaceutical wholesale, Internet medical treatment, and healthy cities.

9 Godiva Food and MBK Partners 2019.02.20 1 Godiva granted MBK Partners a permanent Chocolatier beverage operating license to sell the retail and distribution businesses in Japan, South Korea, Australia, and future development rights to the New Zealand market to MBK Partners. The business covers finished packaging products, e- commerce, travel retail for Japan and South Korea, and more than 300 physical stores.

10 Bellamys Food and Mengniu Dairy 2019.09.16 0.96 Bellamy is a leading global manufacturer of beverage organic infant formula; it is Australia's number one brand, and the products are well received by consumers in the Asia-Pacific region. Through this acquisition, Mengniu will effectively strengthen the high-end infant formula business, and will also help Bellamy's China business grow healthily, providing better products and services for domestic consumers.

11 Carrefour Traditional Suning.com 2019.06.23 0.69 Suning.com bought 80% of Carrefour China (China) retail for Rmb4.8 billion. Suning will carry out a comprehensive digital transformation of Carrefour stores and build an integrated online and offline supermarket shopping scene. The two sides will continue to optimize and share warehousing, logistics, personnel and other aspects to further supplement the logistics warehousing and distribution capacity of Suning FMCG.

12 Red star Traditional Alibaba Group 2019.05.05 0.64 Red Star Holdings successfully issued Macalline retail exchangeable bonds, which were fully paid by Alibaba for Rmb4.359 billion. At the same time, Alibaba acquired 3.7% of Red Star Macalline in Hong Kong stocks.

Source: Public information, Thomson Reuters, Investment China and PwC analysis

19 Deals valued at over US$500 million in 2019 (3/3)

NO. Target Industry Investors Publication Deal value Description company date （ USD bn）

13 Luckin Coffee Hotel, dining Louis Dreyfus 2019.05.17 0.61 Louis Dreyfus Company(LDC), the world's and leisure Company third largest and France's largest food exporter, reached an agreement with Luckin Coffee to set up a joint venture to build and operate a coffee roasting plant. After the completion of Luckin Coffee's IPO, LDC will purchase a total of $50 million of Luckin’s class A common stock in a concurrent private placement at the public offering price.

14 Didi (Beijing Online retail Toyota 2019.07.25 0.6 Toyota and Didi reached an agreement to Xiaoju cooperate in smart mobility services. The new Technology joint venture will buy Toyota cars and lend them Co., Ltd.) to drivers. Toyota dealers will be responsible for car maintenance with their major foothold in the Chinese market.

15 Junlebao Food and Penghai Fund, 2019.07.01 0.58 Mengniu Dairy sold all its equity in Junlebao, beverage Jungan which holds 51% of its equity, and Management concentrated resources to accelerate the expansion of star products and make high- end efforts.

16 Emerald Grain Food and Xiwang Group 2019.05.14 0.5 Xiwang Group and Sumitomo Society of Japan Pty Ltd beverage signed a memorandum on the joint acquisition of Australian Emerald Grain Pty Ltd. The project received a total investment of US$500 million, and Xiwang Group plans to hold an 80% share. The plan is to hit 8 million tonnes of grain trade within three years. Relevant varieties will be imported according to China's needs; Xiwang Group will import Australian high-quality grains into the country through its domestic network.

17 Aihuishou Online retail JD.com 2019.06.03 0.5 JD’s second-hand trading platform "Paipai" (Shanghai Tiantu Capital, will be strategically merged with digital Yueyi Network Morningside recycling platform “Aihuishou". At the same Information Venture time, JD led a new round of financing of more Technology Co., Capital, than US$500 million. Previous shareholders, Ltd.) Tiger Fund, Tiantu Investment, Morningside Venture Gen Brigde Capital, Tiger Fund, Qicheng Capital, and Capital, Fresh Qingxin Capital successively participated in Capital the investment.

Source: Public information, Thomson Reuters, Investment China and PwC analysis

20 Data collection methods and disclaimers

Statistics contained in this presentation and the PricewaterhouseCoopers has excluded certain press release may vary from those contained in transactions which are more in the nature of internal previous press releases. There are three reasons for reorganisations than transfers of control; and this: ThomsonReuters and ChinaVenture historical PwC’s previous data came from a different source. data is constantly updated as deals are confirmed or disclosed;

Transactions include: Transactions exclude:

• Acquisitions of private/public companies • Property/real estate for individual properties resulting in change of control • Rumoured transactions • Investments in private/public companies • Options granted to acquire an additional (involving at least 5% ownership) stake when 100% of the shares have not • Mergers been acquired

• Buyouts/buy-ins (LBOs, MBOs, MBIs) • Any purchase of brand rights

• Privatizations • Land acquisitions

• Tender offers • Equity placements in funds

• Spinoffs • Stake purchases by mutual funds

• Split-off of a wholly-owned subsidiary when • Open market share buyback/retirement of 100% sold via IPO stock unless part of a privatization

• Divestment of company, division or trading • Balance sheet restructuring or internal assets resulting in change of control at parent restructuring level • Investments in greenfield operations • Re-capitalisation • Going private transactions • Joint Venture buyouts • Reverse takeovers • Joint Ventures

• Receivership or bankruptcy sales/auctions

• Tracking stock

21 Contact us

Michael Cheng PwC Asia Pacific & Hong Kong/China Consumer Markets Leader +852 2289 1033 [email protected]

Jennifer Ye China Consumer Markets Leader PwC China +86 (21) 2323 3325 [email protected]

Waldemar Jap Consumer Markets Deals Lead Partner PwC Hong Kong +852 2289 1892 [email protected]

Ken Zhang Deals Advisory Partner PwC China +86 (21) 2323 3120 [email protected]

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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