Alibaba to sell Sun Art to buyout firm DCP for HK$12.3 billion

ALIBABA Group Holding agreed to sell its shares in Sun Art Retail Group to private equity firm DCP Capital, unloading another high-profile physical commerce asset to focus on its core online business.

China’s e-commerce pioneer said it could receive gross proceeds of up to HK$12.3 billion (S$2.2 billion) from selling its more than 70 per cent holding in the chain of Costco-like hypermart stores. That’s significantly less than the US$3.6 billion Alibaba paid just to double its stake in Sun Art in 2020. Sun Art is today worth around US$3 billion overall, despite growing its market value by more than 80 per cent in the past 12 months.

The sale accelerates Alibaba’s retreat from physical retail, an initiative spearheaded years ago by previous CEO Daniel Zhang. Once a dominant player across Chinese commerce, intensifying competition from PDD Holdings and ByteDance have forced Alibaba back to its roots as an online commerce platform.

Under new chief Eddie Wu, Alibaba is focusing investment on areas it considers more promising, from the cloud to online marketplaces. It’s also ramping up abroad, for instance by creating a joint venture to speed up a Korean expansion. Alibaba is now integrating its domestic and international e-commerce operations under the leadership of fast-rising executive Jiang Fan, while steadily selling off holdings it does not consider essential.

Alibaba had been considering selling its controlling stake in Sun Art, which had attracted suitors such as DCP Capital and Hillhouse Investment, Bloomberg News reported in September.

The sale “is considered to be a good opportunity for Alibaba Group to monetise its non-core assets and to utilise such proceeds to better focus on the development of its core businesses and enhance its shareholder return”, the company said on Wednesday (Jan 1).

Just last month, Alibaba agreed to sell its Intime department store business to Youngor Fashion for around US$1 billion, incurring a loss of about 9.3 billion yuan (S$1.7 billion) on its initial investment.

Electronics retailer Suning.com was another of several major brick-and-mortar acquisitions that Zhang orchestrated.

Sun Art runs hundreds of hypermarkets across China under brands including RT-Mart. It also has a distribution and storage network that supplement Alibaba’s own efforts in fresh produce. BLOOMBERG