After grabbing a major chunk of the online commerce business, Alibaba now plans to digitise brick-and-mortar stores to give sales another push. With regards to the same, the Chinese e-commerce behemoth is currently leading the bid to privatise department store chain Intime Retail Group Co. It plans to shell out $2.6 billion to push its dominance into offline stores as well, reads the official statement.
This move from Alibaba comes on the heels of its ambitions to further expand beyond the confines of its hometown and the online space. It is now planning to further augment the online shopping experience by weeding out middlemen and reducing costs. This will further add the sales, delivery, and inventory network of the offline stores to the e-commerce behemoth’s online business. Talking on the same, the official statement reads:
Alibaba is working with offline retailers to transform conventional approach, create new consumer shopping experience and use actions to embrace future opportunities under the new retail model. Those who cling on to the old ways of retailing will be disrupted.
As part of the proposed transaction, Alibaba and Intime founder Shen Guojun have offered to pay HK$10 (approx. $1.29) per piece to buy out the remaining shares. Thus, they are together willing to pay about 42 percent premium over Intime’s previous closing price of HK$7.03 (approx. $0.91). The total spending for this buyout deal amounts to as much as $2.55 billion coupled with other stock options.
In addition, this means Alibaba is teaming up with Intime founder to pick up and cancel shares it already doesn’t own by a way of a scheme of an agreement. They’re now looking to pool internal cash resources and external debt financing to complete the said transaction. Post the closure of this deal, if it goes through, the shareholding pattern would change drastically. Alibaba would then hold a majority 74 percent of the offline department store chain.
Post the announcement of this acquisition (and privatisation), the share prices of the Hong Kong-listed Intime Retail have surged massively. The company had previously frozen the trading of their stock at the closing price of HK$7.03, until the said release. Thus, the stock prices of Intime Retail, which opened for trading today, surged more than 35 percent to start trading beyond HK$9.51.
For those unaware, Alibaba is leading the pack for adding Intime to its arsenal because it is currently one of the minority stakeholders in this company. It had previously invested nearly $692.25 million in the department store chain in exchange for a 27.82 percent shareholding. It has also led investments to the tunes of $4.6 billion in electronics retailer Sunning to bolster its offline reach. Haier is also one of its offline partners.
As for Intime Retail, the company started off with its first department store in 1998 and went on to go public in 2007. It currently operates 29 department stores and 17 shopping malls, which are located in first and mid-tier cities of China. Alibaba plans to expand its technologies via Tmall and Taobao throughout these offline stores in the country.