Chinese speciality teas retailer Urban Tea, along with its wholly-owned subsidiary Ming Yun Tang (Shanghai) Tea (WOFE), have signed a letter of intent (LoI) to acquire 39 PU Tea.

39 PU Tea is involved in tea distribution, cultural heritage projects and product and research development.

Urban Tea CEO Long Yi said: “Acquiring 39 PU Tea is an important step for us, reflecting our strategy to expand our operations and heighten the awareness of our brand in the fruit tea market.

“39 PU Tea complements our current business with its access to high-quality dark teas, as well as its extensive operations designed to spread tea culture through their tea academy.

“We are optimistic that completing this acquisition will help broaden our customer base and provide new options and opportunities for tea drinkers across China.”

As per the terms of the non-binding LoI, Urban Tea will pay 39 PU Tea equity holders consideration, which consists of 70% paid in ordinary shares, while the remaining 30% will be paid in cash.

The consideration for the acquisition is subject to certain operational milestones achieved by 39 PU Tea.

39 PU Tea managing director De’an Hu said: “Urban Tea shares our commitment to tea culture and we are proud to join them to become an industry leader in the speciality tea retail market.

“Our premium dark tea has numerous desirable characteristics, including health benefits such as reducing blood pressure, can be easily stored and appreciates in value through the aging process.”

Completion of the deal is subject to customary closing conditions, as well as due diligence investigations by parties associated with the deal and negotiation and execution of a definitive share exchange agreement.

However, Urban Tea noted that there is no guarantee that a definitive agreement will be entered into or that the proposed deal will be completed.