Alibaba steps up retail redraw with buyout bid
Alibaba took another step forward in its attempt to redraw China’s $4.5tn retail industry with a HK$19.8bn ($2.6bn) offer to take a leading domestic department store private.
The Chinese ecommerce group aims to dismantle the division between online shopping and physical stores, using big data gleaned from shoppers’ browsing and buying to improve shop layout and enabling shoppers to order online via their smartphones and then pick up the goods in-store.
As part of these efforts to blur the lines, Alibaba is now looking to buy out Hong Kong-listed department store and mall operator Intime Retail, in which it took a minority stake in 2014. It also owns a 20 per cent stake in electronics retailer Sunning, bought for $4.6bn in August 2015, and has a joint venture with appliance maker Haier.
“We are seeing malls increasingly hollowing out,” said Duncan Clarke, chairman of consultancy BDA. “There are real headwinds now for traditional retail so [for Intime] this is a defensive move.” For Alibaba, he added, the logic was “a bit underwhelming”.
Alibaba Investment, a subsidiary of the New York-listed group, said yesterday that it will team up with Intime’s founder Shen Guo Jun, to buy and cancel the shares it does not already own by way of a scheme of arrangement.
The offer represents a 42.3 per cent premium to Intime’s last close of HK$7.03, before the trading in the stock was suspended on December 28.
Alibaba owns 27.8 per cent of the issued share capital of Intime, while Mr Shen holds 9.2 per cent. Under the proposed transaction, Alibaba would become Intime’s controlling shareholder, with a stake of about 74 per cent.
Alibaba bought its initial Intime stake in March 2014, investing over $600m in its shares and a convertible bond.
The deal raised a few eyebrows at the time given the waning appeal of listed bricks-and-mortar retailers both in China and globally. But the move was designed to boost online-to-offline business, for instance by allowing shoppers to use Alibaba’s ewallet in Intime’s department stores. Alibaba’s Tmall customers were also given the option to buy from Intime’s inventory and to pick up online orders in-store.
Intime operates 29 department stores and 17 shopping malls, mainly in first and second-tier cities in China.
Alibaba said the transaction reflected its strategy to transform traditional retail by leveraging its “substantial consumer reach” and access to data and technology. “Alibaba is working with offline retailers to transform conventional approach, create new consumer shopping experience and use actions to embrace future opportunities under the new retail model,” the company said.
“我们看到商场越来越冷清，”北京博达克咨询公司(BDA China)的董事长邓肯?克拉克(Duncan Clark)表示，“传统零售业现在确实面临逆境，因此（对于银泰而言）这是一个防御动作。”他补充称，对于阿里巴巴而言，其中的逻辑“不太令人信服”。