13 January 2017

Alibaba to delist Intime Retail

This week Alibaba revealed plans to take Intime Retail private for HKD 14,712 million (USD 1,897 million) in a move that will further extend its presence in the brick-and-mortar retail sector. The buyer, which purchased Intime’s shares and convertible bonds back in 2014, will team up with the target’s founder Shen Guojun to acquire the remaining 54.2 per cent stake in the Hong Kong Stock Exchange-listed group. The offer price of HKD 10 apiece represents a 42.2 per cent premium over Intime’s close of HKD 7.03 on 23rd December, the last trading day prior to the announcement. The deal, which is subject to stockholder and regulatory approvals, is expected to take place by August this year.

Incorporated in the Cayman Islands, Intime’s involvement in the retail industry dates back to 1998, when it opened its first store in Hangzhou. The chain currently has a leading position in Zhejiang province, where Alibaba is headquartered, and has over the years expanded to other Chinese locations such as Hubei, Beijing and Guangxi. It operates a total of 29 department stores and 17 shopping malls and also holds a 50 per cent interest in Beijing Youyi Lufthansa Shopping City.

Despite China’s retail sector growing at 10.7 per cent annually (according to Alibaba’s chief executive Daniel Zhang), Intime has been grappling with lacklustre revenue in recent years as more and more consumers choose to shop online. The target’s same-store sales growth slowed to 0.5 per cent in 2015 from 23.1 per cent in 2011. Overall net profit growth has also been poor over the period.

“Those who cling on to the old ways of retailing will be disrupted, and brick and mortar businesses will be able to create value for consumers if they are integrated with the power of mobile reach, real-time consumer insights, and technology capability to improve operating efficiency,” Zhang said, adding that through the Intime deal, the group will tap into the growth potential of a new form of technology-powered retail business in China.

According to Zephyr, the M&A database published by Bureau van Dijk, Alibaba successfully completed 10 investments last year, with its capital injection in Chinese taxi booking application Xiaoju Kuaizhi (Didi) being the most notable. To gain more ammunition to take on its rival Uber, Didi raised around USD 4,500 million from the e-commerce platform, as well as other giants, such as Apple and Softbank, in June.

Another notable deal during the period was Alibaba’s USD 3,700 million acquisition of the remaining 81.7 per cent stake in Youku Tudou, a video streaming provider in China. Commenting on the takeover, Zhang stated: “Digital products, especially video, are just as important as physical goods in e-commerce, and Youku’s high-quality video content will be a core component of Alibaba’s digital product offering in the future.”

© Zephyr