China's largest electronic retailer Gome is holding talks with US private equity firm Warburg Pincus Asia, one of Gome's foreign investors, on a possible share sale, a source close to the issue was cited by China Business News as saying.

But details have not been revealed and executives from Gome were not reachable for comment.

Since mid-November, Huang Guangyu, Gome's founder and chairman, has been under investigation for alleged illegal share trading. In late November, the company appointed four directors to form a special strategy committee to enhance the corporate governance and cope with the crisis. One of the strategy committee members is Gome's non-executive director Chang Sun, who is also a senior executive at Warburg.

In February 2006, Warburg purchased a 9.71 percent stake in Gome which later appointed Sun as its non-executive director. Gome's top three shareholders are Huang, JP Morgan and Morgan Stanley which own 36 percent, 8.88 percent and 8.17 percent of the company respectively.

In the past few months, Gome's shares have been falling, closing on Nov 21 at HK$1.12, with a market capitalization of HK$14.3 billion, compared with that of HK$21 billion a year ago. Its trading has been suspended since Nov 24.

Subsequent to the investigation into Huang, Gome is reported to be hurt by sluggish cash flow as many banks are unwilling to lend fresh money any more, which has in turn dented suppliers' confidence.

(China Daily December 22, 2008)