By LU Yibei
Bubble tea chain Naixue has become the largest shareholder in its has-been rival Lelecha after spending 525 million yuan (US$75 million) on 43.6 percent of Lelecha’s equity.
Lelecha will continue operating independently while Naixue will offer support on expansion, supply chain, digitalization and management. Naixue acquired Lelecha for its reputation and market in east China.
Founded in 2016, Lelecha was a huge hit for its soft bun and milk tea. The company owned and operated all of its outlets, mostly in prime areas in first-tier cities, and occupying at least 180 square meters.
The tea market thrives on novelty and Lelecha didn’t have any anymore. Youngsters Hay Tea and Naixue are constantly launching new drinks. Last year, Lelecha’s revenue was about a fifth of Naixue’s.
Lelecha has more than 100 stores in China, but has changed strategy and invested heavily in east China while closing flagship stores in Chongqing, Guangzhou and Xi’an. In Beijing, the number of stores was down from 11 to 7.
Last year, Hay Tea founder NIE Yunchen denied having valued the company at 4 billion yuan. As Naixue spent only 525 million yuan for less than half of the company, Lelecha’s appraisement is now around 1.2 billion yuan.
Before the takeover, Lelecha had four rounds of financing. The last, in July 2020, pushed the value of the company to 1.7 billion yuan.
On Wednesday, Naixue shares in HKEX rose as much as 18 percent to HK$8.49 and closed at HK$7.55.
