Urban Tea Inc. (MYT) late last month signed a non-binding letter of intent (LOI) to get controlling stake in two major firms. Its wholly owned firm Hunan Ming Yun Tang Brand Management Co., Ltd. (Ming Yun Tang) was also party in that non-binding agreement.
The LOI was signed with Chuangyeying Brand Management Co., Ltd. (CYY) and Store Master Food Trading Co., Ltd. (Store Master) along with their shareholders.
Listed on NYSE, the Hunan, China-based Urban Tea runs retail business of specialty teas and baked goods while CYY is a holder of franchise permit and owner of several brands registered in China. Currently more than 300 tea beverages franchises have been working with CYY. On the other hand, Store Master is a supply chain management company. It also has expertise in product R&D and optimization of long-term and established supply chain. Also a scalable warehouse that has logistics management system of advanced level is also owned by Store Master. Five individuals are the common owners of CYY and Store Master.
The parties signed LOI considering coming to an agreement of definitive nature. If they succeed then Ming Yun Tang will have a chance to get a controlling stake in both companies. 51% of stakes of each company would be acquired by Ming Yun Tang against cash and Urban Tea’s restricted shares. Ming Yun Tang will also have an access to over 300 franchisees which will provide revenue boost.
The acquisitions, if completed successfully, will result in combining of resources and capabilities of Ming Yun Tang, CYY, and Store Master. The consolidation will cover broader business areas like sales networks, supply chain technologies and brand management. It will help them provide customers with better services and further accelerate their expansion plans.
Urban Tea said that it will disclose the transaction details if it proceeds further.