By Sherry Qin


Haidilao International's shares fell sharply after it announced plans to acquire a Japanese hotel company from Super Hi International in a connected transaction.

The Chinese hotpot chain's shares declined 11% to 17.42 Hong Kong dollars (US$2.23) in early trade on Wednesday, on track for its biggest percentage drop since April 2022.

Haidilao agreed to buy Japan Hai, which owns and manages a hotel, for 2.6 billion yen (US$17.1 million) from Super Hi, it said in an exchange filing after the market closed Tuesday.

Haidilao spun off Super Hi, its international hotpot business, in 2022. Super Hi in turn owns Japan Hai which operates a hotel in Japan and holds a license to develop Japanese hot springs.

Jefferies reckons that investors have reservations about Haidilao's business plan. The deal is a acquisition from a company that Haidilao had previously spun off and Japan Hai isn't related to its main hot pot business, Jefferies analysts Anne Ling and Lisa Liao said in a research note.

They add that Japan Hai's hot spring resort may need additional capital investment, which Jefferies estimates could be a few hundred million yuan.

In its filing, Haidilao said that based "on the Group's positive financial performance, the Group further seeks investment and acquisition opportunities to diversify our revenue sources and strengthen our brand building," Haidilao said. Its net profit in the first half of 2023 surged to CNY2.26 billion from CNY72.3 million a year earlier as China eased its pandemic-related restrictions.

Haidilao believes that Japan Hai's hotel business has growth potential as the tourism industry recovers, it added. Japan Hai plans to develop a hybrid hot spring-conference resort to be completed in 2027.

Super Hi's shares were 0.3% lower at HK$12.92.


Write to Sherry Qin at sherry.qin@wsj.com


(END) Dow Jones Newswires

11-01-23 0143ET