Tianjin Tongrentang outbid five competitors during a public auction Monday to purchase the assets of Tianjin Goubuli Catering (Group) Corp. for 106.0 million yuan (US$12.8 million).

The purchase paves the way for Goubuli's ownership reform and reflects the efforts of China's famous traditional brands to improve competitiveness through consolidation.

"Goubuli" is a type of steamed pork-filled bun that has been a favorite with Chinese consumers for 150 years. Established in 1858 as Dejiuhao, Tianjin Goubuli's current name derives from the sobriquet of its founder, Gao Guiyou, who was known as Gouzi ("dog"). As his stuffed buns became famous, Gao's real name and that of the shop were forgotten, replaced by the play on words using his nickname.

Goubuli became a state-owned enterprise in the 1950s.

Tianjin Tongrentang, which is engaged in traditional Chinese medicine processing and manufacturing, was established in 1852 and was reformed into a shareholding company in 2003.

At Monday's auction, the lowest bid was 15.2 million yuan (US$1.8 million).

Tianjin Tongrentang and five private enterprises -- two Tianjin-based companies, two Zhejiang firms and a Guangdong company -- were involved in the bidding.

Goubuli required whoever took over the company's assets to provide a written plan for short-, medium- and long-term development and not to operate unrelated businesses in Goubuli's buildings. It also required that all registered employees of the company be kept on.

The company's total assets are 117.0 million yuan (US$14.1 million) and it holds debt of 80.5 million yuan (US$9.7 million). Its net assets are 37.0 million yuan (US$4.5 million). Subsidiaries include the Goubuli Hotel, a sourcing and logistic center, a fast-food company and over 70 franchise outlets across the nation.

The company's sales totaled 74.9 million yuan (US$9.0 million) last year, up 29.9 percent year-on-year.

"The move aims to introduce more capital and expertise into Goubuli to carry out an overall property rights reform," said Goubuli's Chairman Zhao Jiaxiang, adding that the market-oriented reform might be conducive to the long-term development and international expansion.

The spokesman for Tianjin Tongrentang stressed that the companies' similar historical and operational backgrounds laid a solid foundation for future operations.

"The purchase is practical for Tianjin Tongrentang's growth and provides a shortcut for Goubuli to enhance its competitive edge amid the cutthroat competition in China's fast-food market," said the spokesman.

Domestic fast-food companies are facing strong challenges from foreign giants such as McDonald's and KFC.

Zhang Ping, a researcher at the Economic Research Center under the Chinese Academy of Social Sciences, told China Daily that acquisitions may be a good way for famous old Chinese brands to consolidate their strength and resources to enhance their overall competitiveness.

(China Daily, China.org.cn March 1, 2005)