Walmart is seeking to raise up to $3.74 billion (€3.40 billion) by selling its stake in Chinese e-commerce firm JD.com, according to a term sheet seen by Reuters, as the U.S. retailer focuses on its own operations in China.
Walmart is offering 144.5 million American depositary shares in the price range of $24.85 to $25.85 (€22.62 to €23.54), the term sheet shows, and Morgan Stanley is the broker-dealer of the offering.
Continued Commercial Relationship
Walmart, the largest shareholder in JD.com, said in a statement that it had been a valued partner over the past eight years, and the U.S. retailer was committed to a continued commercial relationship with the Chinese e-commerce giant.
"This decision allows us to focus on our strong China operations for Walmart China and Sam's Club, and deploy capital towards other priorities," Walmart said.
JD.com's Hong Kong-listed shares fell more than 10% in early trading on Wednesday. U.S.-listed shares dropped 10% in after-market trading on Tuesday to $25.50 (€23.15) after Bloomberg first reported the share sale plan.
JD.com declined to comment. Morgan Stanley did not immediately respond to Reuters' request for comment.
JD.com Performance
The Chinese e-commerce giant last week reported a better-than-expected second-quarter profit, though its share price has fallen around 70% since its peak in early 2021, and trade is little changed from 2016 levels, when Walmart became its major shareholder.
China's retail market has been hit by a persistent downturn in consumer confidence, sparked by a property market slowdown and concerns about employment and incomes.
Major e-commerce firms, including JD.com and rivals Alibaba and PDD Holdings' Pinduoduo have engaged in a brutal price war in order to entice consumers to buy, pressuring revenue growth and margins.
"Walmart said the reduction was to focus on the Chinese market, especially Sam's Club," Liu Xingliang, an internet industry analyst at Beijing-based DCCI Data Center said of the share sale. "This means that Walmart is optimising its global business layout, rather than lacking confidence in JD.com's development prospects."
China Sales
Walmart reported a 17.7% year-on-year rise in revenue from its China business to $4.6 billion (€4.19 billion) in the second quarter on the back of strong growth in its Sam's Club warehouse chain and its digital offering.
The U.S. retailer owns a 5.19% stake in JD.com, according to LSEG data. The partnership between the companies began in 2016 when Walmart sold its Chinese online grocery store, Yihaodian, in return for a 5% stake in JD.com.
