- The deal marks the intention of Asia's most valuable company to try and dominate one of the largest untapped borders in Chinese e-commerce.
- Sun Art also runs a broad logistics and storage network that can complement Alibaba 's attempts to manufacture fresh goods, with hundreds of hypermarkets in China under the Auchan and RT-Mart names.
- Alibaba would increase its direct and indirect interest in the food chain to about 72%, and then make a general bid to the shareholders to acquire the rest of Sun Art.
On the morning of October 19th, Alibaba (09988.HK/BABA.NYSE) announced that it had agreed to acquire Auchan Retail International SA and its affiliates through its subsidiary Taobao China investment totaling approximately HK$28 billion ($3.6 billion US dollars) Jixin Holdings Co., Ltd. shares 70.94%.
After nearly three years of strategic cooperation, Sun Art Retail was officially included by Alibaba, and the digitalization of China’s largest supermarkets has accelerated.
According to current news sources, Jixin Holdings Co., Ltd. holds approximately 51% of Gaoxin Retail (06808.HK).
After the share purchase, Alibaba and its related parties will, directly and indirectly, hold 72% of Sun Art Retail and become the controlling shareholder. Alibaba will incorporate Sun Art Retail into its financial statements.
According to the “Code on Acquisitions and Mergers of Hong Kong Companies”, after the completion of the share purchase, Taobao China will be required to make a compulsory and unconditional general takeover offer in cash for all issued shares of Sun Art at an offer price of HK$8.10 per share.
The offer price of HK$8.10/share, compared with the company’s net assets of HK$2.83 as of June 30, 2020, a premium of 186.03%. According to the general takeover offer, Taobao China may have to pay up to approximately HK$17 billion (US $2.2 billion) to acquire Sun Art’s shares held by other shareholders.
This means that after nearly three years of strategic cooperation, Sun Art Retail was officially included by Alibaba. The digitalization of China’s largest supermarket stores will accelerate, and the entire supermarket retail industry will usher in the next digital development trend.
The deal “suggests that the tech giant seeks to further expand its one-hour home grocery delivery services such as Taoxianda, leveraging the grocer’s extensive offline hypermarts across China,” Bloomberg Intelligence analyst Kevin Kim said. “This could capture consumers flocking to online platforms, further induced by Covid-19 early this year, yet may hurt foot-traffic to the grocer’s physical stores.”
On November 20, 2017, Alibaba announced that it would invest approximately HK$22.4 billion (approximately US $2.88 billion) to, directly and indirectly, hold 36.16% of Sun Art Retail.
The two parties subsequently launched a new retail experiment. Leveraging on Alibaba’s digital ecosystem to promote store digitization, and apply new retail solutions to Gaoxin stores, including online and offline integration, modern logistics, and personalized consumer experience.
Alibaba said that the original idea of cooperating with Sun Art Retail has all become reality today: 484 stores under Sun Art Retail’s RT-Mart and Auchan Supermarkets have been fully online, and have access to Ele.me, Taoxianda, and Tian Cat Supermarket shares inventory business.
All stores provide 1-hour delivery within 5 kilometers of the store, and 180 stores support half-day delivery within 20 kilometers.
According to Alibaba’s fiscal year 2020 report, in the 12 months ended March 31, 2020, Alibaba’s commercial platform, which is dominated by Taoxianda, accounted for approximately 10 percent of its total revenue.
Sun Art Retail pointed out in the 2020 semi-annual report that the new retail solutions provided by Alibaba drove a 5.7% increase in same-store sales, and the company’s net profit increased by 16.8% per year and brought nearly 50 million users to Sun Art Retail. There are nearly 13 million users.