Alibaba to take 13.1b yuan hit in Sun Art Retail sale

Bloomberg and staff reporter

China's e-commerce giant Alibaba (9988) expects to lose 13.18 billion yuan (HK$14.03 billion) on selling out its stake in Sun Art Retail (6808), with the latter possibly withdrawing its listing.

Alibaba agreed to sell about 7 billion shares, or 73.66 percent of the stake, in Sun Art to Paragon Shine, an entity under private equity firm DCP Capital, unloading another high-profile physical commerce asset to focus on its core online business.

If DCP acquires at least 90 percent of shares of Sun Art within a period, the buyer intends to privatize the retailer through compulsory acquisition, Sun Art said in a statement yesterday.

China's e-commerce pioneer said it could receive gross proceeds of up to HK$12.3 billion from selling its more than 70 percent holding in the chain of Costco-like hypermart stores.

That's significantly less than the US$3.6 billion (HK$28.08 billion) Alibaba paid just to double its stake in Sun Art in 2020.

Sun Art was worth around HK$23.66 billion overall, despite growing its market value more than 80 percent in the past 12 months.

The sale accelerates Alibaba's retreat from physical retail, an initiative spearheaded years ago by previous chief executive Daniel Zhang Yong. Once a dominant player across Chinese commerce, intensifying competition from PDD Holdings and ByteDance have forced Alibaba back to its roots as an online commerce platform.

Under new chief Eddie Wu Yongming, Alibaba is focusing investment on areas it considers more promising, from the cloud to online marketplaces. Alibaba is now integrating its domestic and international e-commerce operations under the leadership of fast-rising executive Jiang Fan while steadily selling off holdings it doesn't consider essential.

Just last month, Alibaba agreed to sell its Intime department store business to Youngor Fashion for around US$1 billion, incurring a loss of about 9.3 billion yuan on its initial investment. Electronics retailer Suning.com was another of several major brick-and-mortar acquisitions that Zhang orchestrated.

Sun Art runs hundreds of hypermarkets across China under brands including RT-Mart. It also has a distribution and storage network that supplement Alibaba's own efforts in fresh produce.

Freshippo, another supermarket brand that Alibaba was rumored to sell for 20 billion yuan earlier this year, said on Tuesday that it recorded profits for nine consecutive months.