Alibaba Group Holding Ltd (阿里巴巴) is leading a bid to take department store chain Intime Retail Group Co (銀泰商業集團) private for as much as US$2.6 billion, as China’s largest online retailer deepens its integration with brick-and-mortar stores.
The deal to buy out Intime adds to Alibaba’s burgeoning foothold in physical retail as it pursues growth beyond a slowing online business.
Control of Intime would also allow the e-commerce giant to explore ways to modernize a US$4.5 trillion industry that has not adapted well to the growing popularity of online shopping.
Billionaire Alibaba founder Jack Ma’s (馬雲) goal is to try and up-end a splintered and bloated Chinese retail landscape, stripping out layers of middlemen to reduce costs and improve efficiency. Apart from Intime, Alibaba has partnered with electronics chains Suning Commerce Group Co Ltd (蘇寧電商集團), and Haier Group (海爾) in deals that expanded its own online offerings and sales and delivery network.
“This deal shows that there is still value to brick-and-mortar stores, enough to interest e-commerce players,” said Catherine Lim, a Singapore-based analyst at Bloomberg Intelligence. “What it’s shown is that department store chains are still relevant and of value. We could be seeing renewal of a sunset industry.”
Alibaba and Intime founder Shen Guojun (沈國軍) will pay HK$10 per share for Intime stock they do not already own, a deal that would require as much as HK$19.8 billion (US$2.55 billion) including stock options. That is a 42 percent premium over Intime’s previous close.
The Hong Kong-listed company’s stock surged 35 percent upon resuming trade after a two-week suspension yesterday.
Alibaba, which is set to own almost three-quarters of Intime, is paying a premium for a company that has seen revenue shrink since the second half of 2015. The offer values Intime at about 18.7 times its earnings before interest, taxes, depreciation and amortization (EBITDA) which were 1.39 billion yuan (US$200.69 million) for the 12 months ended June last year, the latest period available, according to Bloomberg calculations.
That compares with the 7.2 times of US$414.6 million in EBITDA that Sycamore Partners paid for US department store chain Belk Inc in 2015, according to Bloomberg’s calculations.
Department stores have struggled in past years to cope as Chinese consumers frustrated with lackluster, poorly managed shopping malls migrate to online bazaars.
Unlike in the US, which is dominated by a clutch of mega-chains, the Chinese retail experience is far more fragmented and inconsistent.
Intime, one of the better-known players, operated and managed just 29 department stores and 17 shopping malls across the country as of the end of June last year, mainly in eastern Zhejiang Province but also in Anhui and Beijing, according to the company’s semi-annual report.
Shenzhen-based Maoye International Holdings Ltd (茂業國際) and Hong Kong-based Lifestyle International Holdings Ltd (利福國際), which operates the upscale Jiuguang chain in China, both issued profit warnings for the first half of last year.
Maoye bonds dropped to record lows after being downgraded by ratings agencies. Intime shares fell 8 percent last year, compared with the 0.4 percent drop in the territory’s benchmark Hang Seng Index.
By teaming up with physical retailers, Alibaba hopes to pioneer a new model of online and offline retail. It sees an opportunity in helping Chinese retailers use technology to transform inventory management, while securing a physical network through which it can get goods to its own customers more efficiently, for instance via letting customers pick up orders from physical stores.
Ma has said that he sees “tremendous challenges” for pure e-commerce operators as the country’s economy slows.
The privatization of Intime is Alibaba’s first deal this year, building on a string of acquisitions in recent years. Alibaba owns about 27.8 percent of Intime and Shen owned 9.17 percent of shares as of yesterday, according to the filing.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day
Thousands of parents in Singapore are furious after a Cordlife Group Ltd (康盛人生集團), a major operator of cord blood banks in Asia, irreparably damaged their children’s samples through improper handling, with some now pursuing legal action. The ongoing case, one of the worst to hit the largely untested industry, has renewed concerns over companies marketing themselves to anxious parents with mostly unproven assurances. This has implications across the region, given Cordlife’s operations in Hong Kong, Macau, Indonesia, the Philippines and India. The parents paid for years to have their infants’ cord blood stored, with the understanding that the stem cells they contained