Alibaba gobbles up stake in China's Walmart

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XAutoplay: On | OffSun Art Retail operates 446 "hypermarket complexes" in 224 cities across 29 provinces, regions and municipalities in China, under the RT-Mart and Auchan banners.

Alibaba acquired the stake in Sun Art Retail at HK$6.50 per share - a sharp discount to the target company's current share price - and said it will separately make a "possible" mandatory cash offer for Sun Art Retail shares at the same price.

The deal would give Auchan Retail, Alibaba Group and Ruentex 36.18 percent, 36.16 percent and 4.67 percent stakes respectively in Sun Art, the companies said in the joint statement. Sun Art also operates superstores and innovative unmanned stores under the "Auchan Minute" brand.

Daniel Zhang the CEO at Alibaba said physical stores represent an indispensable role in the consumer journey, and must be enhanced through technology that is data-driven, and personalized services in today's digital economy. And if Alibaba's announcement this morning sounds like a slightly less ambitious iteration of Amazon's acquisition of Whole Foods for $13.7 billion earlier this year, that seems to be the case as well. As part of the deal, France's Auchan Retail SA will raise its stake in the Hong Kong-listed company to a similar level, and form an alliance with the internet giant to tackle the same Chinese food retail sector Wal-Mart is targeting.

The investment is being made via Alibaba's popular online shopping platform Taobao.

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Alibaba has already rolled out 20 Hema supermarkets in China and also has a strategic partnership with China's largest supermarket operator Bailian Group and a stake in Bailian Group's largest chain Lianhua Supermarket.

Alibaba has invested upwards of US$9.3 billion in brick-and-mortar stores since 2015, and has launched many unstaffed concept shops in the past year.

Alibaba is exerting more efforts to secure offline, rural, and overseas customers as China's urban electronic commerce market shows indications of steeping, including buying extensive infrastructure which it had formerly avoided.

"They're getting into a territory that's not their core strength. for example securing a property, the licenses to sell certain products, paying tax, more labor and so on", said Bain & Company analyst Weiwen Han.

"On the one hand, they really need to do it, but on the other hand, they are facing a lot of challenges that they have never experienced before".

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