Song Hong, general manager of electrical appliance retailer Dazhong, tells local media that his company has sent a legal letter to Yongle to end its merger agreement.

In April 2006, Dazhong and Yongle signed a merger agreement, but Song says Yongle has violated the agreement because Yongle has also signed cooperative agreements with Dazhong's rival Gome.

When Dazhong and Yongle first signed their agreement in April, Yongle provided a CNY150 million initial payment to Dazhong, which Dazhong now says it will keep as a penalty for breach of contract.

Song also says that his company has closed ten Yongle stores in Beijing and Tianjin at the beginning of last week for inventory checks and will return these stores to Yongle after an agreement is reached.

A representative from Yongle says that the company is considering Dazhong's request for ending the contract, but adds that even if the contract between the parties is dismissed, Dazhong must return the CNY150 million.