Alibaba nears first big deal since record antitrust fine

Alibaba Group Holding is poised to make its first major investment since it paid a record antitrust fine as part of a bruising crackdown on Jack Ma’s internet empire.

A consortium led by the e- commerce giant and the Jiangsu provincial government is nearing a deal to buy a stake in the retail arm of Chinese billionaire Zhang Jindong’s Suning conglomerate, people familiar with the matter have said. The deal would add to the 20% stake that Alibaba already owns in Suning.com, one of China’s biggest retailers of appliances, electronics and other consumer goods that is valued at roughly US$8 billion ($10.77 billion).

The potential investment could mark a comeback for Alibaba since authorities levied a US$2.8 billion fine on the company in April for anti-monopoly violations, fuelling its first loss in nine years. The deal would help the e-commerce firm encroach on top rival JD.com’s traditional stronghold of electronics, while joining hands with local authorities signals that the tech billionaire and his company are ready to get back to deal-making.

“Should the deal proceed, it strengthens the case that Alibaba isn’t allowing regulatory overhang to constrain its strategic ambitions or opportunistic investments,” said Michael Norris, a tech analyst with Shanghai-based market research firm AgencyChina. “The potential strategic value of Suning’s stores, distribution centres and last-mile delivery stations to an increasingly omnichannel Alibaba is clear.”

Any deal will likely need to be approved by the State Administration for Market Regulation, the increasingly powerful antitrust watchdog in Beijing. The regulator had previously penalised Alibaba for not properly declaring a past investment in Intime Retail Group, on top of the US$2.8 billion fine levied as part of a wider anti-monopoly investigation.

Even as Alibaba attempts to moves on, Ma’s FinTech arm Ant Group is still undergoing a painful state-ordered transition into a financial holding company that will be regulated more like a bank.

Zhang, the Suning founder, will no longer have control of the company after the deal, the people said, marking the end of his run as a high-profile entrepreneur who drove his firm into an array of businesses, including ownership of the Inter Milan soccer team.

Among hypermarkets, Suning has the fifthlargest nationwide share of 4.4%, according to 2020 data from Euromonitor International. Sun Art Retail Group, which Alibaba controls, has the biggest share at 13.7%. A consolidation of Alibaba’s units would pose a challenge to other players, like Walmart’s China operations — currently in fourth-place with a 9.3% market share — which has a tie-up with JD.com in its online operations.

Alibaba and Suning have long been closely allied, forming a partnership in areas ranging from logistics to online sales. In 2015, Alibaba invested US$4.6 billion for its 20% stake in Suning.com, which in turn paid US$2.3 billion to buy a 1.1% stake in the larger company that it later pared down. Since then, Suning. com’s shares have tumbled about 60% even as Alibaba’s stock more than doubled. The smaller firm’s bonds climbed on June 30 after news of the potential bailout. —