Alibaba leads bid for retail chain
ALIBABA Group Holding is leading a bid to take department store chain Intime Retail Group private for as much as $2.6 billion (R35.6bn), as China’s largest online retailer deepens its integration with brick-and-mortar stores.
The deal to buy out Intime adds to Alibaba’s burgeoning foothold in physical retail as it pursues growth beyond a slowing online business.
Control of Intime will also allow the e-commerce giant to explore ways to modernise a $4.5 trillion industry that hasn’t adapted well to the growing popularity of online shopping.
Billionaire founder Jack Ma’s goal is to try and up end a splintered and bloated Chinese retail landscape, stripping out layers of middlemen to reduce costs and improve efficiency.
Apart from Intime, Alibaba has partnered with electronics chains Suning and Haier in deals that expanded its own online offerings and sales and delivery network.
The Hong Kong-listed company’s stock surged 35 percent upon resuming trade after a two-week suspension yesterday.
The offer values Intime at about 18.7 times Ebitda of 1.39bn yuan ($201 million) for the 12 months ended June 2016, the latest period available, according to Bloomberg calculations.
Department stores have struggled in past years to cope as Chinese consumers frustrated with lacklustre, poorly managed shopping malls migrate to online bazaars.
Unlike in the US, which is dominated by a clutch of mega-chains, the Chinese retail experience is far more fragmented and inconsistent.
Intime, one of the better-known players, operated and managed just 29 department stores and 17 shopping malls across the country as of end-June last year.
By teaming up with physical retailers, Alibaba hopes to pioneer a new model of online and offline retail.
It sees an opportunity in helping Chinese retailers use technology to transform inventory management, while securing a physical network through which it can get goods to its own customers more efficiently, for instance via letting customers pick up orders from physical stores.
Ma has said he sees “tremendous challenges” for pure e-commerce operators as the country’s economy slows.
China’s largest online retailer is also enlarging its global footprint, most notably by opening its Tmall platform to US and other foreign brands keen to sell to Chinese consumers.
Ma met with US President-elect Donald Trump on Monday to discuss how the influential Chinese company could add US businesses to its platform.