Alibaba spends $4.6b as CEO's big­gest deal ever

The Pak Banker - - COMPANIES/BOSS -

Alibaba Group Hold­ing Ltd. will spend 28.3 bil­lion yuan ($4.6 bil­lion) for a stake in Sun­ing Com­merce Group Ltd. as China's big­gest e-com­merce op­er­a­tor adds a net­work of elec­tron­ics stores in its big­gest deal ever.

Alibaba will buy a 19.99 per­cent stake in Sun­ing, which in turn will spend as much as 14 bil­lion yuan for shares in the e- com­merce com­pany, ac­cord­ing to a Busi­ness Wire state­ment on Mon­day. The com­pa­nies will part­ner in lo­gis­tics and online sales to tar­get de­liv­er­ies as fast as two hours.

Alibaba Chair­man Jack Ma is beef­ing up his re­tail pres­ence af­ter a 24 per­cent drop in the com­pany's mar­ket value this year, bol­ster­ing the ap­peal of e-com­merce oper­a­tions fac­ing slow­ing growth in China. Adding Sun­ing to a part­ner­ship with depart­ment store op­er­a­tor In­time Re­tail Group Co. helps Alibaba com­pete with JD.com Inc., which spe­cial­izes in selling elec­tron­ics and has surged in New York trad­ing this year.

"Sun­ing has one of the largest phys­i­cal net­works for selling ap­pli­ances and that would help Alibaba's lo­ca­tion­based ser­vices," said John Choi, an an­a­lyst at Daiwa Se­cu­ri­ties Group Inc. in Hong Kong. "Alibaba is be­com­ing much more in­volved in off­line re­tail through in­vest­ments."

Sun­ing has more than 1,600 out­lets spread across 289 cities in China selling ap­pli­ances, books and baby prod­ucts. Alibaba will be­come the sec­ond- largest in­vestor in the Nan­jing-based re­tailer, trail­ing only Chair­man Zhang Jin­dong.

Alibaba is pay­ing 15.23 yuan a share for the stake, which is 10 per­cent more than Sun­ing's clos­ing price on Fri­day. "This new al­liance brings forth a new com­merce model that fully in­te­grates online and off­line," Ma said in the state­ment. The ac­qui­si­tion is Alibaba's big­gest-ever, ex­clud­ing a $7.1 bil­lion share buy­back in 2012 from Ya­hoo! Inc.

Alibaba has quick­ened the pace of its deals this year as its share price has plum­meted in New York trad­ing. So far this year, Alibaba has an­nounced 22 deals at a to­tal value of $9.1 bil­lion, com­pared with 25 deals all of last year at a value of $5.9 bil­lion.

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