HONG KONG (Reuters) -- GOME Electrical Appliances, China's top electronics retailer, said on Sunday that it will have a dominant position in key Chinese markets after taking over the management of Beijing-based rival Dazhong Electrical Appliances.

GOME has agreed to lend 3.6 billion yuan ($489 million) to a third party to buy Dazhong. GOME will take over the management of Dazhong, which has annual sales of more than 6 billion yuan, and will have an exclusive option to buy Dazhong for not less than 3.65 billion yuan.
“This arrangement will give our shareholders more protection and we can consolidate Dazhong’s earnings into the listed company (GOME),” GOME's president Chen Xiao told a telephone conference call.
The deal would buy GOME more time to clear regulatory procedures, Chen said, with Dazhong hoping the transaction would close as soon as possible.
Dazhong is the fourth-largest appliance retail chain in China after Gome, Suning Alliance Co. and Jiangsu Five Star Appliance Co., which is majority-owned by Best Buy, the largest U.S. electronics retailer.
The deal was sealed after GOME's archrival Suning abandoned a plan to buy Dazhong, which has more than 81 stores in northern China mainly in Beijing and Tianjin.
Dazhong is strategically important for both GOME and Suning, which are competing head-on to tap rising consumer demand created by China's urbanization drive, analysts say.
Chen said GOME's strong cash position bolstered by fundraisings earlier this year enabled it to elbow out its competitors with a lucrative offer.
Together, GOME and Dazhong will have 110 to 120 stores in Beijing. The stores will operate under the two brands but funding, sourcing and logistics will merge, a GOME executive said.
“Our priority for the coming year is to lift the profitability of each store and help Dazhong stores to reach a level on par with GOME's,” he said.
Dazhong earned between 120 million yuan and 130 million yuan before it was reorganized earlier this year.
“There is a lot of room to improve,” the executive said.
Goldman Sachs estimates the deal could lift GOME's earnings by roughly 2 to 4 percent in 2008 and by 6 to 9 percent in 2009.
The likes of Wal-Mart Stores Inc., Carrefour S.A. and Metro AG have also been rushing to expand their presence in China, which is on course to become the world's second-largest consumer market by 2015.
($1=7.369 yuan)