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(Yicai) Jan. 2 -- Alibaba Group Holding is offloading its entire stake in Sun Art Retail, the operator of hypermarket chain RT-Mart, to Chinese private equity firm DCP Capital for HKD13.1 billion (USD1.6 billion), around a quarter of the price that it paid for it, as the Chinese e-commerce giant continues to divest of non-core assets to refocus on its core business.
Alibaba’s share price [HKG:9988] was trading down 0.5 percent at HKD81.95 (USD10.50) as of 12 p.m. today, while Sun Art’s stock [HKG:6808] was trading down 16.1 percent at HKD2.08 (USD0.27). Earlier in the day it plunged 35 percent to HKD1.60
Beijing-based DCP Capital will pay up to HKD1.75 (USD0.23) per share, Hangzhou-based Alibaba said yesterday. This is a 29.4 percent discount on Sun Art’s closing price on Dec. 31.
Alibaba purchased a 36.1 percent stake in Sun Art in 2017 for HKD22.4 billion (USD2.8 billion). Three years later it spent a further HKD27.9 billion to hike the stake to 73.6 percent. Alibaba unit New Retail also holds 5 percent of shares.
This means that Alibaba is selling its entire 78.6 percent stake for around a quarter of the price that it paid for it as the company shifts away from using its e-commerce platforms to "infuse blood" into its physical retail businesses. It is also no longer ‘burning money’ to help its non-core businesses seize market share.
Sun Art operates three major supermarket chains, namely RT-Mart, RT-Mart Super and the M-Club members-only stores. It ran 502 stores, including 466 hypermarkets, 30 medium-sized supermarkets and six M-Club stores, across the country as of the end of September.
However, the supermarket chain has been struggling to break even in recent years. The company logged net profit of CNY186 million (USD25.4 million) in the six months ended Sept. 30. But in the fiscal year ended March 31, it logged losses of CNY1.6 billion (USD219 million) on revenue of CNY72.5 billion (USD10 billion).
This is a far cry from 2017, the year that Alibaba bought in, when the firm posted net profit of CNY3 billion (USD411 million) and revenue of CNY102.3 billion (USD14 billion), according to its financial reports.
Alibaba has been selling off its non-core assets in recent months. Just last month Alibaba sold its department store chain Intime Retail Group at a CNY9.3 billion (USD1.3 billion) loss. In November, it also pared its stake in online cosmetics retailer Shanghai Lirenlijuang Cosmetics.
Alibaba Chairman Joseph Tsai addressed speculation about its exit from brick-and-mortar retailing in February. “Alibaba’s balance sheet still contains some traditional physical retail businesses, which are not our core focus,” he said. “It is reasonable for Alibaba to exit these sectors.” The market situation at that time meant that a withdrawal could take time, Tsai added.
Other non-core businesses still held by Alibaba include e-grocery Freshippo, its takeout platform Ele.me and local service provider Koubei.
Editors: Tang Shihua, Kim Taylor