Wal-Mart gets restricted approval to raise stake in China e-commerce firm

SHANGHAI Aug 14 (Reuters) - Wal-Mart Stores Inc has received restricted approval to raise its stake in and become the controlling shareholder of a Chinese e-commerce company, China's Ministry of Commerce said on its website on Tuesday.

With more than 200 million Chinese people shopping online, China is expected to become the world's largest e-commerce market by 2015, Boston Consulting Group said in a report.

Wal-Mart had said in February it would raise its stake in online supermarket Yihaodian to around 51 percent by buying into its parent. Wal-Mart did not provide any financial details of the deal.

The acquisition was subject to an anti-monopoly review that was extended several times and finally approved with restrictions after the commerce ministry decided the deal may have a negative impact on competition given Wal-Mart's and Yihaodian's leading positions in the market.

"Walmart's application to increase its investment in Yihaodian, a fast-growing e-commerce website in China, received conditional approval by MOFCOM's Anti-Monopoly Bureau on August 13, 2012. The transaction remains subject to receipt of applicable regulatory approvals and other closing conditions," Wal-Mart said in a statement.

The restrictions include: Yihaodian must use its current e-commerce platform for sales; Yihaodian's parent is not allowed to host third-party transactions on the platform; and Wal-Mart cannot use variable interest entity (VIE) arrangements to conduct telecommunication services currently operated by Yihaodian.

VIEs are a popular way for foreign investors to circumvent China's restrictions on foreign ownership in certain sectors. A number of non-Chinese companies have, since the late 1990s, used the VIE structure to secure financial and operational control of domestic Chinese companies through a series of service agreements, rather than by purchasing shares.