Alibaba to Sell Sun Art to Buyout Firm DCP for $1.6 Billion

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

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China’s e-commerce pioneer said it could receive gross proceeds of up to HK$12.3 billion ($1.6 billion) from selling its more than 70% holding in the chain of Costco-like hypermart stores. That’s significantly less than the $3.6 billion Alibaba paid just to double its stake in Sun Art in 2020. Sun Art is today worth around $3 billion overall, despite growing its market value more than 80% 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 Inc. and ByteDance Ltd. 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 ecommerce operations under the leadership of fast-rising executive Jiang Fan, while steadily selling off holdings it doesn’t 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 monetize its non-core assets and to utilize such proceeds to better focus on the development of its core businesses and enhance its shareholder return,” the company said in a statement Wednesday.

What Bloomberg Intelligence Says

Alibaba’s loss-making sale of its Intime department-store chain reflects its determination to focus on technology-driven internet platforms, AI and global e-commerce in 2025. The $1 billion of sale proceeds, which will result in a $1.3 billion loss to the tech firm, can fund share buybacks and dividends next year. As of Dec. 16, Alibaba remained in negotiations to sell its 78.7% stake in Sun Art grocer.

– Catherine Lim and Trini Tan, analysts

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Just last month, Alibaba agreed to sell its Intime department store business to Youngor Fashion Co. for around $1 billion, incurring a loss of about 9.3 billion yuan ($1.3 billion) on its initial investment.

Electronics retailer Suning.com Co. 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.

–With assistance from Claire Che and Dong Cao.

(Updates with details from the statement and Korean deal from the second paragraph)