Portfolio

Alibaba takes control of Sun Art in $3.6bn deal

By Abigail Townsend

Date: Monday 19 Oct 2020

Alibaba takes control of Sun Art in $3.6bn deal

(Sharecast News) - E-commerce giant Alibaba Group has taken a majority stake in Chinese hypermarket chain Sun Art Retail Group in a $3.6bn deal.
China's Alibaba already owns 21% of the retailer, which has around 480 stores across the country. But on Monday it emerged that Alibaba was upping that to 72% through the acquisition of a stake in A-RT Holdings, which owns 51% of Sun Art, from privately-owned French retailer Auchan.

In a statement, Alibaba chief executive Daniel Zhang 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 customers with a fully integrated experience."

As at 1300 BST, shares in Alibaba were ahead 1% while Sun Art soared 19%. Both firms are listed in Hong Kong.

Clive Black, head of research at Shore Capital, compared the deal to Amazon's 2017 acquisition of bricks and mortar retailer Whole Foods.

"A similarly important process has been taking place in Asia, where Alibaba - China's online retail behemoth - has been building its position in local grocer Sun Art.

"We see [this] step by Alibaba as a further interesting development, where the economic question is not really about online versus offline but the win-win that comes from an effective combination.

"Where the likes of Alibaba and Amazon go in future with the online-offline model, which brings with it closer access to shoppers through stores and the ability to explore click and collect, which reduces key fulfilment costs, may be a key strategic factor conditioning respective grocery markets in future."

Mark Lynch, partner at Oghma Partners, said: "This will no doubt improve Alibaba's ability to source and distribute food direct to the consumer, which in its turn challenges brand owners to maintain visibility. It could further shift the dynamic between supplier and distributor, not necessarily in a good way for suppliers."

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