Alibaba invests $3.6 billion to take control of Sun Art Retail

Continuing its effort to integrate online and offline retail resources, Alibaba Group will invest approximately $3.6 billion to take a controlling stake in Sun Art Retail Group, a hypermarket and supermarket operator in China.

Daniel Zhang, chairman and CEO of of Alibaba Group, said: “As the COVID-19 pandemic is accelerating the digitalisation of consumer lifestyles and enterprise operations, this commitment to Sun Art serves to strengthen our New Retail vision and serve more consumers with a fully integrated experience." 

Alibaba had first invested in Sun Art in November 2017, as it sought to bulk up its presence in China's booming retail market. All Sun Art physical stores in China have been integrated into Alibaba’s Taoxianda and Tmall Supermarket platforms, providing one-hour and half-day on-demand delivery to consumers. As of June 30, Sun Art operates 481 hypermarkets and three mid-size supermarkets in China. 

Besides Sun Art, Alibaba, the owner of Taobao, the world's biggest online retailer, has earlier made a clutch of other investments in this industry previously. It acquired a 35% stake in department store chain InTime in 2014 (it would later acquire it completely and take it private), a fifth of Sunning in 2015  and then invested in supermarket operator Lianhua. 

In contrast to Alibaba's growing retail heft, foriegn companies have struggled to scale in China's market. Among those who have tried and failed to crack China's market include British supermarket chain Tesco, Germany's Metro  and French operator Carrefour.

This deal will raise Alibaba's aggregate direct and indirect stake to just over 72%. Alibaba is also considering purchase of the remaining Sun Art shares for HK$17 billion, it disclosed in a filing to stock exchanges. The price represents a 21% premium over its Friday closing price. 

Alibaba will acquire 70.94% of the equity interest in A-RT Retail Holdings from Auchan Retail International and its subsidiary. A-RT holds approximately 51% of the equity interest in Sun Art. Following the transaction, Alibaba will consolidate Sun Art in its financial statements, with Peter Huang appointed chairman of Sun Art in addition to his current role as CEO.

A-RT Retail is controlled by Auchan Holding, a unit of the Mulliez family investment, one of the wealthiest families in France.