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Alibaba bags Chinese retailer Intime in $2.6 Billion deal

Latest Update: January 10, 2017 | 221 Views
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Alibaba Group Holding Ltd. said it would team up with the founder of China’s Intime Retail (Group) Co. to take the department-store operator private, as the e-commerce giant seeks to extend its online dominance into physical stores.

China’s largest online retailer and Intime’s founder, Shen Guojun, will pay as much as 19.8 billion Hong Kong dollars (US$2.6 billion) to take the Hong Kong-listed department-store chain private, Alibaba said in a statement Tuesday. Alibaba already has a 28% stake in Intime from a US$692 million investment it made in 2014; its shareholding would rise to about 74% after the deal.

The deal requires approval from Intime shareholders and from a court in the Cayman Islands, where Intime is incorporated, an Alibaba spokeswoman said.

The announcement furthers Alibaba’s foray into physical stores and underlines a push by Alibaba Executive Chairman Jack Ma to deepen links between the retailer’s online operations, brick-and-mortar stores, and logistics. Alibaba, which runs popular shopping websites Taobao and Tmall, also has a stake in Suning Commerce Group Ltd., a large Chinese electronics physical retail chain. Alibaba said more Chinese are choosing to shop online through their mobile phones, providing an opportunity for physical stores to reach mobile shoppers on their devices via location services.

Intime operates 29 department stores and 17 shopping malls mainly in eastern China. The chain carries brands from small Chinese labels to high-end luxury names such as Gucci.

Intime’s acquisition would give Alibaba the physical store space to allow online-only brands selling on Taobao and Tmall to tout their wares in traditional malls, while Intime store merchants would be able to sell their products on Alibaba’s platforms, said Ben Cavender, a principal at China Market Research Group.

In addition, Alibaba’s extensive collection of consumer data from Tmall and Taobao could help boost Intime’s store sales and minimize excess inventory, an issue that has dogged retailers in China, Mr. Cavender said. “They have a very good idea of how buyer profiles work and can quickly put the right styles, colors and brands in department stores,” he said.

According to Alibaba and Mr. Shen’s proposal, shares of Intime would be bought out for HK$10 (US$1.29) each, a premium of 42% over the company’s most recent closing price. The transaction would be financed through internal cash resources, possibly combined with external debt financing.

The buyout of Intime comes after Alibaba said last year that it was being investigated by the U.S. Securities and Exchange Commission over its practices in consolidating affiliates, particularly its Cainiao Network logistics arm. The SEC was also looking into its operating data from Singles’ Day, China’s biggest online-shopping day, and Alibaba’s practices for related-party transactions, it said at the time. An Alibaba spokeswoman said the Intime transaction was unrelated to any SEC inquiry.

Intime’s stock price rose as much as 38% after trading resumed Tuesday, bringing the company’s valuation to roughly US$3.3 billion.