China’s eCommerce pioneer expects gross proceeds of up to HK$12.3bil from selling its more than 70% holding in the chain of Costco-like hypermart stores. — Bloomberg
BEIJING: Alibaba Group Holding Ltd has agreed to sell its shares in Sun Art Retail Group Ltd to private equity firm DCP Capital, unloading another high-profile physical commerce asset at a discount to focus on its core online business.
China’s eCommerce pioneer expects gross proceeds of up to HK$12.3bil from selling its more than 70% holding in the chain of Costco-like hypermart stores.
That’s significantly less than the US$3.6bil Alibaba paid just to double its stake in Sun Art in 2020, and falls far short of Sun Art’s 2024 market value of about US$3bil.
The Chinese retailer’s shares sank as much as 35% in early Hong Kong trading, while Alibaba slid more than 1%.
The sale accelerates Alibaba’s retreat from physical retail, a major investment initiative spearheaded years ago by previous chief executive officer (CEO) Daniel Zhang.
The company is now integrating its domestic and international eCommerce operations under the leadership of fast-rising executive Jiang Fan, while steadily selling off holdings it doesn’t consider essential.
That last is considered critical enough that Alibaba is willing to swallow significant losses on its past bets, even as it raises capital to invest in areas such as artificial intelligence and the cloud.
Bloomberg Intelligence analysts Catherine Lim and Trini Tan said Alibaba will incur about US$3bil of losses from the disposal of non-core retail assets including Sun Art.
“The sale of the grocer at a 0.6 times price-to-net asset valuation trails market value estimates by 30% and lags JD.com’s 3.5 times multiple when it sold Yonghui Superstores last year.
“Alibaba’s sale proceeds are linked to Sun Art’s profits through 2028 and may therefore be pressured by Meituan’s strategic tie-up with Walmart in China,” they said.
Once a dominant player across Chinese commerce, intensifying competition from PDD Holdings Inc and ByteDance Ltd have forced Alibaba back to its roots as an online commerce platform.
Under new chief Eddie Wu, Alibaba is focusing investment on areas it considers more promising, from the cloud to online marketplaces. It’s also ramping up abroad, for instance by creating a joint venture to speed up a South Korean expansion.
Just last month, Alibaba agreed to sell its Intime department store business to Youngor Fashion Co for around US$1bil, incurring a loss of about 9.3 billion yuan on its initial investment.
Alibaba faces a loss of about US$3bil overall on its physical retail deals so far, Bloomberg Intelligence estimated.
The sale “is considered to be a good opportunity for Alibaba Group to monetise its non-core assets and to utilise such proceeds to better focus on the development of its core businesses and enhance its shareholder return,” the company said in a statement. — Bloomberg
