Alibaba Group Holding Ltd., one of China's leading e-commerce giants, announced its agreement to sell a majority stake in Sun Art Retail Group to private equity firm DCP Capital for HK$12.298 billion (approximately $1.6 billion). This decision marks a significant step in Alibaba's strategy to refocus on its core e-commerce business while divesting non-essential assets.
The 78.7% stake, held by Alibaba subsidiaries, has been pivotal in the company's foray into physical retail. Acquired for $3.6 billion in 2020, the stake was intended to bolster Sun Art's hypermarket operations through Alibaba's digital and logistical capabilities. However, intensifying competition and shifting market dynamics have prompted the company to recalibrate its priorities.
Sun Art operates a chain of hypermarkets in China, offering a Costco-like retail experience. Despite a remarkable 85% surge in its share price on the Hong Kong Stock Exchange over the past year, far outpacing the 20% rise of the Hang Seng Index, the asset no longer aligns with Alibaba's strategic focus. The transaction reflects Alibaba's ongoing efforts to streamline its operations under CEO Eddie Wu, who has emphasized investment in cloud services, online marketplaces, and international expansion.
The sale "is considered a good opportunity for Alibaba Group to monetize its non-core assets and to utilize such proceeds to better focus on the development of its core businesses and enhance its shareholder return," Alibaba stated in an official filing.
The divestment also accelerates the company's broader retreat from physical retail. Recent reports indicate Alibaba is finalizing the sale of its Intime department store chain, even at a loss. According to Bloomberg Intelligence, the anticipated $1 billion proceeds from the Intime sale-despite resulting in a $1.3 billion loss-will be redirected toward shareholder returns, including share buybacks and dividends.
Alibaba's decision to shed Sun Art was reportedly informed by its long-term vision of integrating domestic and international e-commerce operations. The company has undertaken significant restructuring efforts, including the establishment of a joint venture to expedite its expansion in South Korea. Alibaba has also unified its global e-commerce platforms under the leadership of Jiang Fan, an executive credited with driving innovation in online marketplaces.
